Presented below is information related to Oriole Inc.’s inventory, assuming Orio
ID: 2562323 • Letter: P
Question
Presented below is information related to Oriole Inc.’s inventory, assuming Oriole uses lower-of-LIFO cost-or-market.
(per unit)
Skis
Boots
Parkas
$243.20
$135.68
$67.84
271.36
185.60
94.40
24.32
10.24
3.20
259.84
134.40
65.28
40.96
37.12
27.20
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 skis.
(b) The cost amount that should be used in the lower-of-cost-or-market comparison of boots.
(c) The market amount that should be used to value parkas on the basis of the lower-of-cost-or-market.
(per unit)
Skis
Boots
Parkas
Historical cost$243.20
$135.68
$67.84
Selling price271.36
185.60
94.40
Cost to distribute24.32
10.24
3.20
Current replacement cost259.84
134.40
65.28
Normal profit margin40.96
37.12
27.20
Explanation / Answer
(a) Ceiling limit = selling price - cost to distributre
Floor limit = ceiling limit - normal profit margin
(b) The cost amount that should be used in the lower of cost or market comparison of Boots is the historical cost of Boots.
The cost amount 135.68
(c) Parkas ceiling limit = 91.2
Parkas floor limit = 64
Parkas current replacement cost = 65.28
Market value is the middle value of ceiling limit, floor limit and the replacement cost.
The market amount = 65.28.
Skis Boots Parkas Ceiling limit 247.04(271.36 - 24.32) 175.36(185.6 - 10.24) 91.2(94.4 - 3.2) Floor limit 206.08(247.04 - 40.96) 138.24(175.36 - 37.12) 64(91.2 - 27.2)Related Questions
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