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 |
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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