Question

In applying the lower of cost or market rule, the floor is defined as:

A. net realizable value less a normal profit margin.
B. current replacement cost.
C. net realizable value.
D. historical cost.

Answer 1

In applying the lower of cost or market rule, the floor is defined as the net realizable value less a normal profit margin. The net realizable value is the estimated selling price of an item, less any costs of completion, disposal, and transportation.

Step-by-step explanation:

In applying the lower of cost or market rule, the floor is defined as the net realizable value less a normal profit margin. This means that the floor is determined by subtracting the normal profit margin from the net realizable value. The net realizable value is the estimated selling price of an item, less any costs of completion, disposal, and transportation. It represents the amount the item is expected to sell for in the market.