Based on a physical inventory taken on December 31, Chewy Co. determined its chocolate inventory on a LIFO 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 in its December 31 balance sheet? OA) $24,000 B) $20,000 C) $26,000 OD) $28,000
Based on a physical inventory taken on December 31, Chewy Co. determined its chocolate inventory on a LIFO 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 in its December 31 balance sheet? OA) $24,000 B) $20,000 C) $26,000 OD) $28,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Based on a physical inventory taken on December 31, Chewy Co. determined its
chocolate inventory on a LIFO 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 in its December 31 balance sheet?
A) $24,000
OB) $20,000
C) $26,000
OD) $28,000
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