Question

Presented below is information related to Coronado Inc.’s inventory, assuming Coronado uses lower-of-LIFO cost-or-market.

(per unit)		Skis		Boots		Parkas
Historical cost		$254.60		$142.04		$71.02
Selling price		284.08		194.30		98.83
Cost to distribute		25.46		10.72		3.35
Current replacement cost		272.02		140.70		68.34
Normal profit margin		42.88		38.86		28.48

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

$

Answer 1

a)	Skis
	Ceiling
	Selling price				284.08
	less:cost to distribute				-25.46
	Ceiling				258.62	answer
	Floor
	NRV				258.62
	less:normal profit margin				-42.88
	Floor				215.74	answer
b)	Boots
	Ceiling
	Selling price				194.3
	less:cost to distribute				-10.72
	Ceiling				183.58
	Floor
	NRV				183.58
	less:normal profit margin				-38.86
	Floor				144.72
	Cost	Replacement	ceiling	Floor	MV	LCM
	142.04	140.7	183.58	144.72	144.72	142.04
	Answer	142.04
c)	Parkas
	Ceiling
	Selling price				98.83
	less:cost to distribute				-3.35
	Ceiling				95.48
	Floor
	NRV				95.48
	less:normal profit margin				-28.48
	Floor				67
	Cost	Replacement	ceiling	Floor	MV	LCM
	71.02	68.34	95.48	67	68.34	68.34
	Answer	68.34