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Bass uses lower-of-cost-or-market to account for the B47AB item in its inventory.  The selling price of Bass...

Bass uses lower-of-cost-or-market to account for the B47AB item in its inventory.  The selling price of Bass Group's item B47AB is $26 per unit. Its (historical) cost is $21 and its replacement cost is $22. The disposal cost (cost to sell) of a B47AB is estimated at $2. The normal profit margin on a B47AB is 40% of selling price. At what value per unit should Bass report this item in its inventory, after applying lower-of-cost-or-market?

$20.00

$21.00

$19.00

$13.60
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Answer #1

Answer- $ 21

Inventory is valued at lower of historical cost or maket

Historical Cost of $ 21 is lower than market replacement cost of $ 22 .

In market , the higher between replacement cost of $ 22 and net realisable value less Net profit of $13 .60 is to be considered , which is replacement cost of $22

Item Historical Cost Replacement NRV           ( 26-2) NRV-NP                 (24-(40%*26))
B47AB $21 $22 $24 $13.6
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