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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Moore Company uses the LIFO cost flow assumption and carries Product A in inventory on December 31, 2019, at its unit cost of $9.50. Because of a sharp decline in demand for the product, the selling price was reduced to $10.00 per unit. Moore’s normal profit margin on Product A is $2.00, disposal costs are $1.00 per unit, and the replacement cost is $6.50. Under the lower of cost or market rule, Moore’s December 31, 2019, inventory of Product A should be valued at a unit cost of:

  1. a. $6.50
  2. b. $9.00
  3. c. $7.00
  4. d. $9.50

To determine

Calculate the unit cost of Product A at December 31, 2019.

Explanation

Lower-of-cost-or-market: The lower-of-cost-or-market (LCM) is a method which requires the reporting of the ending merchandise inventory in the financial statement of a company, either at current market value or at historical cost price of the inventory, whichever is less.

Calculate the unit cost of Product A at December 31, 2019.

Unit cost of Product A at December 31, 2019}(Selling price

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