Lower of Cost or Market Value

3.MRT sells its product, a rare metal, in a controlled market with a quoted price applicable to all quantities. The total cost of 1,000 pounds of the metal now held in inventory is $110,000. The total selling price is $310,000, and estimated costs of disposal are $10,000. At what amount should the inventory of 1,000 pounds be reported in the balance sheet? a. $100,000. b. $110,000. c. $300,000. d. $310,000

310,000- 10,000=300,000 as rare metals (in a controlled market with a quoted price applicable to all quantities) are reported at NRV

LYZ sells product P for $40 per unit. The cost of one unit of P is $36, and the replacement cost is $35. The estimated cost to dispose of a unit is $8, and the normal profit is 40%. At what amount per unit should product P be reported, applying lower-of-cost-or-market? a. $16. b. $32. c. $35. d.$36

Cost = $36. NRV (Ceiling) = $40 - $8 = $32, RC = $35 Floor = NRV - PM = $32 - ($40 × .40) = $16, Market=$32 LCM=$32

4. Oslo Corporation has two products in its ending inventory, each accounted for at the lower of cost or market. A profit margin of 30% on selling price is considered normal for each product. Specific data with respect to each product follows: Product #1 Product #2 Historical cost $20.00 $ 35.00 Replacement cost 22.50 27.00 Estimated cost to dispose 5.00 13.00 Estimated selling price 40.00 65.00 In pricing its ending inventory using the lower-of-cost-or-market, what unit values should Oslo use for products #1 and #2, respectively? a. $20.00 and $32.50. b. $23.00 and $32.50. c. $23.00 and $30.00. d. $22.50 and $27.00.

Product 1: RC = $22.50, Ceiling: NRV = $40 - $5 = $35 Floor: NRV - PM = $35 - ($40 × .3) = $23 Market= $23 LCM=$20. Product 2: RC = $27 Ceiling: NRV = $65 - $13 = $52 Floor: NRV - PM = $52 - ($65 × .3) = $32.50 LCM= $32.50

6.Given the acquisition cost of product ALPHA is $17, the net realizable value for product ALPHA is $16.70, the normal profit for product ALPHA is $1.24, and the replacement cost for product ALPHA is $14.72, what is the proper per unit inventory price for product ALPHA? a. $17.00. b. $15.46 c. $14.72. d. $16.70.

RC = $14.72 Ceiling: NRV = $16.70, Floor: NRV - PM = $16.70 - $1.24 = $15.46 Market= $15.46 & Cost = $17.

5.Lexington Company sells product 1976NLC for $50 per unit. The cost of one unit of 1976NLC is $45, and the replacement cost is $43. The estimated cost to dispose of a unit is $10, and the normal profit is 40%. At what amount per unit should product 1976NLC be reported, applying lower-of-cost-or-market? a. $20. b. $40. c. $43. d. $45.

RC = $43 Ceiling: NRV = $50 - $10 = $40, Floor: NRV - PM = $40 - ($50 × .40) = $20. LCM= $40.

Given the historical cost of product Z is $40, the selling price of product Z is $80, costs to sell product Z are $6, the replacement cost for product Z is $41, and the normal profit margin is 40% of sales price, what is the market value that should be used in the lower-of-cost-or-market comparison? a. $40. b. $74. c.$41. d. $42

RC=$41, NRV (Ceiling) = 80-6= 74, Floor= NRV-Normal Profit=74-(80*0.4) =42 Then, Market= 42 as Market cannot be lower than Floor