Teel Distribution Co.has determined its December 31, 2007 inventory on a FIFO basis at $250,000.Information pertaining to that inventory follows: $$\begin{array} { l r }
\text { Estimated selling price } & \$ 255,000 \
\text { Estimated cost of disposal } & 10,000 \
\text { Normal profit margin } & 30,000 \
\text { Current replacement cost } & 225,000
\end{array}$$ Teel records losses that result from applying the lower-of-cost-or-market rule.At December 31, 2007, the loss that Teel should recognize is
A)$0.
B)$5,000.
C)$20,000.
D)$25,000.

Question

Teel Distribution Co.has determined its December 31, 2007 inventory on a FIFO basis at $250,000.Information pertaining to that inventory follows: $$\begin{array} { l r } 
\text { Estimated selling price } & \$ 255,000 \
\text { Estimated cost of disposal } & 10,000 \
\text { Normal profit margin } & 30,000 \
\text { Current replacement cost } & 225,000
\end{array}$$ Teel records losses that result from applying the lower-of-cost-or-market rule.At December 31, 2007, the loss that Teel should recognize is
A)$0.
B)$5,000.
C)$20,000.
D)$25,000.

Quizplus · Accepted Answer

The Answer of Teel Distribution Co.has determined its December 31, 2007 inventory on a FIFO basis at $250,000.Information pertaining to that inventory follows: $$\begin{array} { l r } 
\text { Estimated selling price } & \$ 255,000 \
\text { Estimated cost of disposal } & 10,000 \
\text { Normal profit margin } & 30,000 \
\text { Current replacement cost } & 225,000
\end{array}$$ Teel records losses that result from applying the lower-of-cost-or-market rule.At December 31, 2007, the loss that Teel should recognize is
A)$0.
B)$5,000.
C)$20,000.
D)$25,000.

Teel Distribution Co Teel Records Losses That Result from Applying the Lower-Of-Cost-Or-Market Rule