Determine the proper carrying value of each inventory item using the lower of co
ID: 2450061 • Letter: D
Question
Determine the proper carrying value of each inventory item using the lower of cost or market method.
Item
Cost
Replacement Cost
Estimated Sales Price
Disposal Costs
Normal Profit
A
11.00
10.00
16.00
1.80
4.00
B
12.00
12.00
20.00
1.60
2.50
C
5.00
4.00
9.50
1.90
1.00
D
14.00
15.00
15.00
2.40
3.50
Can someone explain to me what the Disposal Cost is? And how to calculate this problem?
Item
Cost
Replacement Cost
Estimated Sales Price
Disposal Costs
Normal Profit
A
11.00
10.00
16.00
1.80
4.00
B
12.00
12.00
20.00
1.60
2.50
C
5.00
4.00
9.50
1.90
1.00
D
14.00
15.00
15.00
2.40
3.50
Explanation / Answer
Disposal cost is the cost to sell. Sometimes in order to sell a commodity we have to incur some cost and that cost is disposal cost. Item Cost Estimated Sales Price Disposal Costs Net Sales Price = Sales Price - Disposal cost Lower of Cost or Net sales Price A 11.00 16.00 1.80 14.20 11.00 B 12.00 20.00 1.60 18.40 12.00 C 5.00 9.50 1.90 7.60 5.00 D 14.00 15.00 2.40 12.60 12.60
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