Question

In: Accounting

Presented below is information related to Bonita Inc.’s inventory, assuming Bonita uses lower-of-LIFO cost-or-market. (per unit)...

Presented below is information related to Bonita Inc.’s inventory, assuming Bonita uses lower-of-LIFO cost-or-market.

(per unit)

Skis

Boots

Parkas

Historical cost

$224.20

$125.08

$62.54

Selling price

250.16

171.10

87.03

Cost to distribute

22.42

9.44

2.95

Current replacement cost

239.54

123.90

60.18

Normal profit margin

37.76

34.22

25.08


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.)

Ceiling Limit

$

Floor Limit

$   


(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.)

Solutions

Expert Solution

a) Skis
Ceiling
Selling price 250.16
less:cost to distribute -22.42
Ceiling 227.74 answer
Floor
NRV 227.74
less:normal profit margin -37.76
Floor 189.98 answer
b) Boots
Ceiling
Selling price 171.1
less:cost to distribute -9.44
Ceiling 161.66
Floor
NRV 161.66
less:normal profit margin -34.22
Floor 127.44
Cost Replacement ceiling Floor MV LCM
125.08 123.9 161.66 127.44 127.44 125.08
Answer 125.08
c) Parkas
Ceiling
Selling price 87.03
less:cost to distribute -2.95
Ceiling 84.08
Floor
NRV 84.08
less:normal profit margin -25.08
Floor 59
Cost Replacement ceiling Floor MV LCM
62.54 60.18 84.08 59 60.18 60.18
Answer 60.18

ekkarill92 answered 1 year ago
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