Question

Garcel, Inc., held unfinished LIFO inventory at a cost of $85,000 with a sales value of $125,000. The inventory will cost $10,500 to complete. The normal profit margin is 30% of sales. The replacement cost of the inventory was $75,000. What amount should Garcel report as inventory on the balance sheet?

Answer 1

$77,000

Step-by-step explanation:

Given:

Inventory cost = $85,000

sales value = $125,000

Cost of completing inventory = $10,500

Normal profit margin = 30% of sales

Replacement cost of the inventory = $75,000

Now,

Net realizable value (NRV)

= sales value - Cost of completing inventory

= $125,000 - $10,500

= $114,500

Amount of inventory = NRV - Normal profit

= $114,500 - 30% of $125,000

= $114,500 - $37,500

= $77,000