Question

Presented below is information related to Bramble Inc's inventory, assuming Bramble uses lower-of-LIFO cost-or-market. (per unit) Skis Boots Parkas Historical cost $67.84 94.40 Selling price $243.20 $135.68 271.36 185.60 24.32 10.24 259.84 134.40 40.96 37.12 Cost to distribute Current replacement cost 3.20 65.28 27.20 Normal profit margin 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, eg. 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, eg. 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.)

Answer 1

Part A

Ceiling	$247.04
Floor	$206.08

Ceiling = selling price – cost to distribute = 271.36-24.32 = 247.04

Floor = selling price – cost to distribute – normal profit margin = 271.36-24.32-40.96 = 206.08

Part B

Cost = $135.68

Part C

Cost = $65.28

Market value is middle value of ceiling, floor and replacement cost

Replacement cost = 65.28

Ceiling = 94.40-3.20 = 91.20

Floor = 94.40-3.20-27.20 = 64