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Rowan Company has four different categories of inventory. The quantity, cost, and market value for...

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Accounting

Rowan Company has four different categories of inventory. The quantity, cost, and market value for each of the inventory categories are as follows:

Item Quantity Cost Per Unit Market Value Per Unit
1 220 $ 4.40 $ 4.60
2 130 $ 6.20 $ 6.00
3 100 $ 10.00 $ 9.25
4 25 $ 20.50 $ 25.00

The company carries inventory at lower-of-cost-or-market applied to the entire stock of inventory in the aggregate. How would the implementation of the lower-of-cost-or-market rule impact the elements of the companys financial statements?

Multiple Choice

  • Increase total assets and stockholders equity by $55.50.

  • Decrease total assets and stockholders equity by $101.00.

  • Decrease total assets and stockholders equity by $79.00.

  • Have no effect on total assets or stockholders equity.

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