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Teel Distribution Co. LCM Question Where I am confused is that when following LCM, the market value should be the replacement cost, at 225, given
Teel Distribution Co. LCM Question
Where I am confused is that when following LCM, the market value should be the replacement cost, at 225, given that it is the middle-value between the ceiling and floor of 245 and 215 respectively. With that in mind, the loss should be reflected as 25 (250 cost - 225 LCM); what am I missing here? Please explain in detail for rating.
1. Teel Distribution Co. has determined its December 31, 2007 inventory on a FIFO basis at $250,000. Information pertaining to that inventory follows: Estimated selling price $255,000 Estimated cost of disposal/completion 10,000 Normal profit margin 30,000 Current replacement cost 225,000 Teel records losses that result from applying the lower-of-cost-or-market rule. At December 31, 2007, the loss that Teel should recognize is a. $0. b. $5,000. c. $20,000. d. $25,000. Answer Key: 1-6Step by Step Solution
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