Presented below is information related to Rembrandt Inc.’s inventory. (per unit) Skis Boots Parkas
Historical cost $190.00 $106.00 $53.00
Selling price 212.00 145.00 73.75
Cost to distribute 19.00 8.00 2.50
Current replacement cost 203.00 105.00 51.00
Normal profit margin 32.00 29.00 21.25
Determine the following:
(a) the two limits to market value (i. e., the ceiling and the floor) that should be used in the lower-of-cost-or-market computation for skis.
Ceiling Limit $
Floor Limit $
(b) the cost amount that should be used in the lower-of-cost-or-market comparison of boots. The cost amount $
(c) the market amount that should be used to value parkas on the basis of the lower-of-cost-or-market. The market amount $

A. Ceiling Limit $193.00

Floor Limit $161.00

B. $106.00

C. $51.00

Explanation:

(a) Calculation to determine the two limits to market value that should be used in the lower-of-cost-or-market computation for skis.

Ceiling Limit =$212 - $19

Ceiling Limit =$193.00

Floor Limit =$212 - $19 - $32

Floor Limit =$161.00

Therefore the two limits to market value that should be used in the lower-of-cost-or-market computation for skis will be :

Ceiling Limit $193.00

Floor Limit $161.00

(b) Based on the information given boots has cost amount of $106.00 which means that

the cost amount which should be used in the lower-of-cost-or-market comparison of boots will be $106.00

Therefore The cost amount will be $106.00

(c) Based on the information given Parkas Current replacement cost was $51.00 which means that the MARKET AMOUNT that should be used in order to value parkas on the basis of the lower-of-cost-or-market will be $51.00

Therefore The market amount will be $51.00

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