3. Presented below is information related to Headland Inc.'s inventory, assuming Headland uses lower-of-LIFO cost-or-market. (per unit) Skis Boots Parkas Historical cost $266.00 $148.40 $74.20 Selling price 296.80 203.00 103.25 Cost to distribute 26.60 11.20 3.50 Current replacement cost 284.20 147.00 71.40 Normal profit margin 44.80 40.60 29.75 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. (b) The cost amount that should be used in the lower-of-cost-or-market comparison of boots. (c) The market amount that should be used to value parkas on the basis of the lower-of-cost-or- market.

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter8: Inventories: Special Valuation Issues
Section: Chapter Questions
Problem 2RE: Black Corporation uses the LIFO cost flow assumption. Each unit of its inventory has a net...
Question
3. Presented below is information related to Headland Inc.'s inventory,
assuming Headland uses lower-of-LIFO cost-or-market.
(per unit)
Skis
Boots Parkas
Historical cost
$266.00 $148.40
$74.20
Selling price
296.80
203.00
103.25
Cost to distribute
26.60
11.20
3.50
Current replacement cost
284.20
147.00
71.40
Normal profit margin
44.80
40.60
29.75
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.
(b) The cost amount that should be used in the lower-of-cost-or-market comparison of boots.
(c) The market amount that should be used to value parkas on the basis of the lower-of-cost-or-
market.
Transcribed Image Text:3. Presented below is information related to Headland Inc.'s inventory, assuming Headland uses lower-of-LIFO cost-or-market. (per unit) Skis Boots Parkas Historical cost $266.00 $148.40 $74.20 Selling price 296.80 203.00 103.25 Cost to distribute 26.60 11.20 3.50 Current replacement cost 284.20 147.00 71.40 Normal profit margin 44.80 40.60 29.75 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. (b) The cost amount that should be used in the lower-of-cost-or-market comparison of boots. (c) The market amount that should be used to value parkas on the basis of the lower-of-cost-or- market.
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