Question
ABC Company has 2,000 units of each of its three products in its year-end inventory. Per unit data for each of the products are as
- ABC Company has 2,000 units of each of its three products in its year-end inventory. Per unit data for each of the products are as follows:
Product 1 Product 2 Product 3
Cost $ 65 $ 49 $ 30
Replacement cost 63 30 32
Selling price 85 51 43
Selling costs 21 5 8
Normal profit 25 9 3
Determine the carrying value of ABCs inventory assuming that the lower of cost or market (LCM) rule is applied to individual products. Assume that LCM adjustments are common for ABC. What is the before-tax income effect of the LCM adjustment?
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Corporate Risk Management
Authors: Faisal F. Al-Thani, Tony Merna
2nd Edition
0470518332, 978-0470518335
