Multiple Choice Question 132 Cullumber Distribution Co. has determined its Decem
ID: 2438363 • Letter: M
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Multiple Choice Question 132 Cullumber Distribution Co. has determined its December 31, 2017 inventory on a FIFO basis at $1088000. Information pertaining to that inventory follows: Estimated selling price Estimated cost of disposal Normal profit margin Current replacement cost $1140000 52000 132000 1008000 Cullumber records losses that result from applying the lower-of-cost-or-market rule. At December 31, 2017, the loss that Cullumber should recognize is O $132000. O $52000. $80000. O $0 Click if you would like to Show Work for this question: Open Show WorkExplanation / Answer
Maket value is the middle of Ceiling, Floor and Replacement cost.
Ceiling = Net Realizable value = Selling price - Cost of disposal
= 1,140,000 - 52,000
= 1,088,000
Floor = Net realizable value - Normal profit margin
= 1,088,000 - 132,000
= 956,000
Replacement cost = 1,008,000
Market = 956,000
Cost = 1,088,000
Lower of Cost or Market = 956,000
Loss = Cost - Lower of cost or market
= 1,088,000 - 956,000
= 132,000
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