Final answer:
The inventory item would be valued at the lower of cost or market, which is determined by comparing the cost, replacement cost, net realizable value, and net realizable value less a normal profit margin. In this question, the market value is the replacement cost of $75, which is the correct value for the inventory item on the balance sheet.
Step-by-step explanation:
The inventory item would be valued at the lower of cost or market. The market value is determined by the replacement cost, net realizable value, and net realizable value less a normal profit margin. Here, we are given a replacement cost of $75, a net realizable value of $82.50, and a net realizable value less a normal profit margin of $69. The cost of the item is $76.50.
According to the lower of cost or market rule, the inventory should be reported on the balance sheet at the market value, since the market value is less than the cost, and the market value falls within the range designated by the net realizable value and the net realizable value less normal profit margin.
The market value in this case is the replacement cost of $75, because it is lower than the net realizable value but higher than the net realizable value less the normal profit margin. So the correct answer is B. $75.