To go back to the whole Lower of cost or Market/NRV debate:
Based on a physical inventory taken on December 31, an entity determined its inventory on a FIFO basis to be $70,000, with a replacement cost of $65,000. The entity estimated that after further processing costs of $8,000, the completed inventory could be sold for $75,000. The entity's normal profit margin is 30%. What amount should the entity report as inventory in its December 31 balance sheet under the lower of cost or market?
a. $44,500
b. $65,000
c. $67,000
d. $70,000
According to becker the answer is B when using lower of cost or market. But the questions says inventory is determined on a FIFO basis… So do you all think in the real exam they'll ask something like this? If so, should I just use whatever they ask me to use to calculate inventory on the exam? According to the lecture if anything other than LIFO or Retail is used, you should use Lower of cost or NRV. Am I missing something?
I asked Becker about it and waiting for an answer.
.