Question

Company has the following items as inventory as of December 31, 2016. What is the value...

Company has the following items as inventory as of December 31, 2016. What is the value of inventory by applying Lower Cost of Market? (LIFO)

ITEM COST CURRENT REPLACEMENT COST ESTIMATED SELLING PRICE COMPLETION & DISPOSAL COST
1 $65 $68 $80 $3
2 $80 $72 $102 $8
3 $90 $105 $112 $10
4 $38 $42 $40 $4
5 $20 $21 $30 $2
6 $55 $45 $67 $2

For all inventory items, Normal Profit Margin is 30% of selling price.

Product Replacement Cost Ceiling Floor Designated Market Cost Lower Cost of Market

Homework Answers

Answer #1

Ceiling = Net realizable value = Net selling price - Cost to complete and dispose

Floor = Net realizable value - Normal profit margin

Designated market = Middle number of Ceiling, Floor and Replacement cost

Product Replacement cost Ceiling Floor Designated Market Cost Lower Cost of Market
1 68 77 (80-3) 53 [77-(80*0.3)] 68 65 65
2 72 94 (102-8) 63.4 [94-(102*0.3)] 72 80 72
3 105 102 (112-10) 68.4 [102-(112*0.3)] 102 90 90
4 42 36 (40-4) 24 [36-(40*0.3)] 36 38 36
5 21 28 (30-2) 19 [28-(30*0.3)) 21 20 20
6 45 65 (67-2) 44.9 [65-(67*0.3)] 45 55 45
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