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Information about an item of inventory accounted for using the LIFO method is given below: Historical cost $36.00 Selling pri
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Answer #1

Purchase CostC= $ 36

Replacement Cost = $ 35

Net Realisable value - normal profit:

Selling Price 60
Less: Selling expenses 4
NRV 56
Less: Normal profit (60*30%) 18
So, NRV-NORMAL PROFIT 38

As per the LCM rule, when Replacement Cost<NRV-NORMAL MARGIN, Replacement cost is deemed to be the NRV-NORMAL MARGIN.

So lower of Cost ie 36 and replacement cost ie 38, hence 36. Thus Option A is correct.

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