Question

€‹Landers, Inc. has 7 units in inventory on December 31. The units were purchased in November for $190 each. The price lists from suppliers indicate the current replacement cost of the item to be $184 each. What is the effect on gross profit if Landers values its ending merchandise inventory using the lower-of-cost-or market rule?

a. The gross profit would increase by $ 6
b. The gross profit would decrease by$ 42
c. The gross profit would increase by $ 42
d. The gross profit would not be affected.

Answer 1

b. The gross profit would decrease by $42

Step-by-step explanation:

Landers Amount

Cost price 190.00

Less: Replacement 184.00

$6.00

Number of units $7.00

Decrease in gross profit $42.00 (Replacement * Number of units)

units by