Presented below is information related to Sunland Inc.’s inventory, assuming Sunland uses lower-of-LIFO cost-or-market. (per unit) Skis Boots Parkas Historical cost $239.40 $133.56 $66.78 Selling price 267.12 182.70 92.93 Cost to distribute 23.94 10.08 3.15 Current replacement cost 255.78 132.30 64.26 Normal profit margin 40.32 36.54 26.78 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. (Round answers to 2 decimal places, e.g. 52.75.) (b) The amount that should be used in the lower-of-cost-or-market comparison of boots. (Round answers to 2 decimal places, e.g. 52.75.) (c) The amount that should be used to value parkas on the basis of the lower-of-cost-or-market. (Round answers to 2 decimal places, e.g. 52.75.)
Presented below is information related to Sunland Inc.’s inventory, assuming Sunland uses lower-of-LIFO cost-or-market.
|
(per unit)
|
Skis
|
Boots
|
Parkas
|
|||
|---|---|---|---|---|---|---|
|
Historical cost
|
$239.40
|
$133.56
|
$66.78
|
|||
|
Selling price
|
267.12
|
182.70
|
92.93
|
|||
|
Cost to distribute
|
23.94
|
10.08
|
3.15
|
|||
|
Current replacement cost
|
255.78
|
132.30
|
64.26
|
|||
|
Normal profit margin
|
40.32
|
36.54
|
26.78
|
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. (Round answers to 2 decimal places, e.g. 52.75.)
(b) The amount that should be used in the lower-of-cost-or-market comparison of boots. (Round answers to 2 decimal places, e.g. 52.75.)
(c) The amount that should be used to value parkas on the basis of the lower-of-cost-or-market. (Round answers to 2 decimal places, e.g. 52.75.)
Ceiling = Selling price - cost to distribute
Floor = Selling price - cost to distribute - Normal profit margin
Determining the market value of the inventory;
1. If the replacement cost > NRV, market value is = NRV(ceiling)
2. If the replacement cost < (NRV-normal profit margin), Market value is = Floor limit
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