[agripper]

The replacement cost of an inventory item measured using the FIFO method is below the net realizable value and above the net realizable value less a normal profit margin. The inventory item’s original cost is above the net realizable value. Under the lower of cost or market method, the inventory item should be valued at:

A.

original cost.

Incorrect B.

replacement cost.

C.

net realizable value.

D.

net realizable value less normal profit margin.

You answered B. The correct answer is C.

Accounting Standards Update (ASU) 2015-11 requires that, for inventory measured using FIFO or average cost, it be measured at the lower of cost or net realizable value (NRV) rather than the lower of cost or market. NRV is the estimated, ordinary selling prices, less reasonably predictable costs of completion, disposal, and transportation. (Inventory measured under the LIFO or retail method is measured at the lower of cost or market.)