Question

The original cost of an inventory item is above the replacement cost and the net realizable value. The replacement cost is below the net realizable value less the normal profit margin. As a result, under the lower-of-cost-or-market method, the inventory item should be reported at the

Answer 1

Net realizable value

Step-by-step explanation:

Net realizable value can be defined as the value of an asset that can be realized when the sale of an asset occured, less a reasonable estimate of the amount of the costs that is associated with the disposal of the asset.

Under U.S. Generally Accepted Accounting Principles the Inventory can be reported at either the lower of cost or market .

Therefore Based on the information given the cost is higher and greater than the replacement cost, and is higher than net realizable value, less the normal profirm margin. Therefore we can also say that market is equal to NET REALIZABLE VALUE and the market is less or lower than cost, which means that the inventory should be valued at NET REALIZABLE VALUE.