If the value of our inventory has decreased, we must evaluate whether we need to take a loss in the current period related to this decrease in value. This is common in technological industries, where products become obsolete over time.

Concept #1: Lower of Cost or Market

Practice: Using the following data, determine the value of inventory at the lower of cost or market. Apply lower of cost or market to each inventory item. Assume expenses of $2 per unit are expected to be incurred in selling the inventory.