Brief Exercise 9-4 Presented below is information related to Ivanhoe Inc.’s inve

Question

Brief Exercise 9-4

Presented below is information related to Ivanhoe Inc.’s inventory, assuming Ivanhoe uses lower-of-LIFO cost-or-market.

(per unit) Skis Boots Parkas Historical cost Selling price Cost to distribute Current replacement cost Normal profit margin $197.60 $110.24 150.80 8.32 109.20 30.16 220.48 19.76 211.12 33.28 $55.12 76.70 2.60 53.04 22.10 Determine the following (a) The two limits to market value (i.e., the ceiling and the floor) that should be used in the lower-of-cost-or-market computation for Ceiling Limits Floor Limit (b) The cost amount that should be used in the lower-of-cost-or-market comparison of boots The cost amount (c) The market amount that should be used to value parkas on the basis of the lower-of-cost-or-market. The market amount

Explanation / Answer

Solution:(a):

Ceiling limit = selling price - cost to distribute

= $220.48 - $19.76 = $200.72

Floor limit = selling price - cost to distribute - Normal profit margin = $220.48 - $19.76 - $33.28 = $167.44

Solution:(b):

The cost amount = Historical cost of boots = $110.24

Solution:(C):

The market amount = Current replacement cost of parkas = $53.04

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