The West Company Uses the Perpetual Inventory System and Has

Short Answer

The West Company uses the perpetual inventory system and has computed the cost of its inventory to be $6,400 as follows: 200 units of Product A at a unit cost of $10; 300 units of Product B at a unit cost of $12; and 100 units of Product C at a unit cost of $8. The current replacement cost of each of the above items is $12.50, $11 and $7, respectively. West's accountant is not sure yet whether to apply the lower-of-cost-or-market rule by individual items or by the entire stock in aggregate. Indicate whether each of the following statements pertaining to the West Company is true or false.
_____ a) When referring to Product B, the "cost" totals $3,300.
_____ b) If West selects to apply the lower-of-cost-or-market rule by individual items, Product A would be listed at $12.50 per unit.
_____ c) West would record a write-down of inventory if is uses the individual items approach, but would not if it uses the aggregate approach.
_____ d) If West uses the individual items approach, $6,000 will be reported for inventory on the balance sheet.
_____ e) For Product C, the lower of cost or market is $800.