The Original Cost of an Inventory Item Is Above the Replacement

question 97

Multiple Choice

The original cost of an inventory item is above the replacement cost and the net realizable value. The replacement cost is below the net realizable value less the normal profit margin. As a result, under the lower-of-cost-or-market method, the inventory item should be reported at the

• A) net realizable value.
• B) net realizable value less the normal profit margin.
• C) replacement cost.
• D) original cost.

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Definitions:

Uniform Commercial Code

A comprehensive set of laws governing commercial transactions in the United States.

Breach of Contract

The violation of any of the agreed-upon terms and conditions of a binding contract. This breach could involve not performing on time, not performing in accordance with the terms of the agreement, or not performing at all.

Impracticable

Not possible to do or carry out in practice, either due to technical, legal, or other constraints.

Contingency

A future event or circumstance that is possible but cannot be predicted with certainty and may affect the outcome of a legal agreement.