Data related to the inventories of Mountain Ski Equipment and Supplies is presented below:
-In applying the lower of cost or market rule, the inventory of supplies would be valued at:
A) $45,000.
B) $54,000.
C) $50,000.
D) $48,000.

Question

Data related to the inventories of Mountain Ski Equipment and Supplies is presented below:  
-In applying the lower of cost or market rule, the inventory of supplies would be valued at:
A) $45,000. 
B) $54,000. 
C) $50,000. 
D) $48,000.

Quizplus · Accepted Answer

RC = $50,000.
NRV = $60,000 - ($60,000 × 10%) = $54,000.
NRV - Normal profit margin = $54,000 - ($60,000 × 15%) = $45,000.
Designated market = RC = $50,000.
Cost = $48,000.
Cost is lower than market.

Data Related to the Inventories of Mountain Ski Equipment and Supplies