Robust Inc. has the following information related to an item in its ending inventory. Acer Top has a cost of $125, a replacement cost of $117, a net realizable value of $133, and a normal profit margin of $17. What is the final lower-of-cost-or-market inventory value for Acer Top?
A) $116.
B) $125.
C) $117.
D) $133.

Question

Quizplus · Accepted Answer

The final lower-of-cost-or-market inventory value is the lower of the cost ($125) and the replacement cost ($117), which is $117. Since the net realizable value ($133) is higher than the ending inventory value, it is not used in this calculation. The normal profit margin is also not used in LCM valuation. Therefore, the final lower-of-cost-or-market inventory value for Acer Top is $117.