Question

The replacement cost of a LIFO basis inventory item is below the net realizable value and above the net realizable value minus the normal profit margin. The original cost of the inventory item is below the net realizable value minus the normal profit margin. Under the lower-of-cost-or-market (LCM) method, the inventory item should be measured at _________.

Answer 1

Answer:

historic cost.

Explanation:

As the original cost is below the net realizable value minus normal profit margin the lower between the cost and market value therefore lower than replacement cost too. Hence, we should do no adjustment and keep the inventory valued at historic cost.