Question

The balance sheet value of a firm's inventory is $50,000. Suppose that the firm purchases supplies at a cost of $4,000 and adds them to inventory. A day later, the market value of the recently purchased supplies changes to $2,500. Assuming no other changes to inventory, and using the historical cost method, what is the final balance sheet value of inventory? Note: Students with prior accounting experience should not apply the monthly "lower of cost or market" adjustment. This is a day-to-day fluctuation.

Answer 1

Answer:  

Given data,

The balance sheet value of a firm's inventory is $50,000

the firm purchases supplies at a cost of $4,000

A day later, the market value of the recently purchased supplies changes to $2,500.

Explaination:

According to the historical cost method, the cost of a benefit depends on the first expense of the advantage independent of the market estimation of the advantage. Along these lines, the accounting report estimation of the stock would be

$50,000+$4,000

= $54,000

The final balance sheet value of inventory = $54,000.