Madison Co. has determined its year-end inventory on a LIFO basis to be $600,000. Information pertaining to that inventory is as follows: What should be the reported value of Madison's inventory?
A) $600,000.
B) $620,000.
C) $690,000.
D) $610,000.

Question

Madison Co. has determined its year-end inventory on a LIFO basis to be $600,000. Information pertaining to that inventory is as follows:  What should be the reported value of Madison's inventory?
A) $600,000. 
B) $620,000. 
C) $690,000. 
D) $610,000.

Quizplus · Accepted Answer

RC = $620,000.
NRV = $720,000 ? $30,000 = $690,000.
NRV - Normal profit margin = $690,000 - $80,000 = $610,000.
Designated market is replacement cost = $620,000 which is less than NRV and more than NRV minus normal profit margin.
Cost = $600,000.
Cost is less than market.