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

Question

Brief Exercise 9-4 Presented below is information related to Metlock Inc.’s inventory, assuming Metlock uses lower-of-LIFO cost-or-market. (per unit) Skis Boots Parkas Historical cost $247.00 $137.80 $68.90 Selling price 275.60 188.50 95.88 Cost to distribute 24.70 10.40 3.25 Current replacement cost 263.90 136.50 66.30 Normal profit margin 41.60 37.70 27.63 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. Ceiling Limit $ 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

a)

b)cost amount to use for boots =Historical cost =$ 137.80

c)market value to use for parkas :

Formula SKis Boots Parkas Ceiling NRV=Selling price-cost to distribute 275.6-24.7=250.90 188.50-10.40=178.1 95.88-3.25=92.63 Floor NRV-Normal profit 250.90-41.60=209.3 178.1-37.7=140.4 92.63-27.63=65

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