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​Landers, Inc. has 7 units in inventory on December 31. The units were purchased in November for​ $180 each. The price lists from suppliers indicate the current replacement cost of the item to be​ $174 each. What is the effect on gross profit if Landers values its ending merchandise inventory using the lower-of-cost-or-market ​rule?

Answer :

eugeniawatanabe

Answer:

There is not effect on gross profit

Explanation:

Gross Profit is the difference between Revenue (Sales) and Cost of goods sold (COGS), that gives us an idea of a company's efficiency at using its labor and supplies in producing goods or services.  

The difference between prices in the final inventory has to be posting in a Price difference account (PRD).  

The amount of it, in this particular case, is calculated like this: 7 * (180 – 174) = 42. This is an expense  

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