Question

Data related to the inventories of Mountain Ski Equipment and Supplies is presented below: Skis Boots Apparel Supplies Selling price $ 199,000 $ 169,000 $ 139,000 $ 79,000 Cost 137,500 142,500 99,500 57,500 Replacement cost 139,000 131,900 129,000 69,000 Sales commission 15 % 15 % 15 % 10 % Normal gross profit ratio 25 % 25 % 20 % 20 % In applying the lower of cost or market rule, the inventory of supplies would be valued at: Multiple Choice $57,500. $69,000. $71,100. $55,300.

Answer 1

Answer:

$55,300

Explanation:

According to the scenario, computation of the given data are as follows:-

Replacement cost of supplies = $69,000

NRV = Selling Price - (Selling Price × Sales Commission)

= $79,000 - (79,000 × 10 × 100)

= $79,000 - $7,900

= $71,100

Net Profit = Selling Price × Normal Gross Profit Ratio

= ( 79,000 × 20÷100)

= $15,800

Inventory of The Supplies Would Be Valued = NRV - NP

= $71,100 - $15,800

= $55,300

The inventory of the supplies would be valued at $55,300.