look another one that will mind F#ck you, I got the correct answer because I know that FIFO uses LCNRV however the question specifically asks for lower of cost or market which would make the answer $24000, i dont think the question should state an unacceptable method to account for FIFO and the give you the correct answer under an acceptable costing method:
Based on a physical inventory taken on December 31, 20X1, Chewy Co. determined its chocolate inventory on a FIFO basis at $26,000 with a replacement cost of $20,000. Chewy estimated that, after further processing costs of $12,000, the chocolate could be sold as finished candy bars for $40,000. Chewy's normal profit margin is 10% of sales. Under the lower of cost or market rule, what amount should Chewy report as chocolate inventory on its December 31, 20X1, balance sheet?
A.
$28,000
Correct B.
$26,000
C.
$24,000
D.
$20,000
explanation:
Inventory measured using any method other than LIFO or the retail inventory method (e.g., FIFO or average cost) is measured at the lower of cost and net realizable value (NRV), which is defined to be the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. If the NRV of inventory is lower than its cost, the difference is recognized as a loss in earnings in the period in which it occurs.
Chewy should report chocolate inventory on December 31, 20X1 at cost of $26,000, which is lower than the NRV of $28,000 (selling price of $40,000 less processing costs of $12,000).
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