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Lower of cost or market

A. Ezekial Distribution Co. has calculated its December 31, 2007 inventory on a FIFO basis at $250,000. The following information pertains to that inventory:
Estimated selling price $255,000
Estimated cost of disposal 10,000
Normal profit margin 30,000
Current replacement cost 225,000
Ezekial records losses that result from applying the lower-of-cost-or-market rule. At December 31, 2007, the loss that Ezekial should recognize is

B. Summers Company had a gross profit of $360,000, total purchases of $420,000, and an ending inventory of $240,000 in its first year of operations as a retailer. Summers's sales in its first year must have been?

C. If an inventory unit has declined in value below original cost, but the market value exceeds net realizable value, the amount to be used for purposes of inventory valuation is?

Solution Preview

A.Ezekial Distribution Co. has calculated its December 31, 2007 inventory on a FIFO basis at $250,000. The following information pertains to that inventory:
Estimated selling price $255,000
Estimated cost of disposal 10,000
Normal profit margin 30,000
Current replacement cost 225,000
Ezekial records losses that result from applying the ...

Solution Summary

The solution explains some questions relating to inventory valuation using lower of cost or market rule.

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