Question

Based on a physical inventory taken on December 31, 20X1, Chewy Co. determined its chocolate inventory on a FIFO basis at $26,000 with a replacement cost of $20,000. Chewy estimated that, after further processing costs of $12,000, the chocolate could be sold as finished candy bars for $40,000. Chewy's normal profit margin is 10% of sales. What amount should Chewy report as chocolate inventory on its December 31, 20X1, balance sheet?A. $28,000B. $26,000C. $24,000D. $20,000

Answer 1

The correct option is B

Step-by-step explanation:

The amount which is to be reported as the chocolate inventory on the balance sheet date December 31, 20X1 is the $26,000 because on grounded of physical inventory which is taken on the December 31, 20X1, was $26,000.

Therefore, Chewy will be having a $26,000 amount of inventory of chocolate on the account in order to produce the candy bars and then sell them in the market to earn the profit.