Given the Historical Cost of Product Z Is $40, the Selling

question 99

Multiple Choice

Given the historical cost of product Z is $40, the selling price of product Z is $50, costs to sell product Z are $6, the replacement cost for product Z is $41, and the normal profit margin is 40% of sales price, what is the amount that should be used to value the inventory under the lower-of-cost-or-market method?

• A) $22.
• B) $40.
• C) $42.
• D) $41.

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Definitions:

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal installments.

Present Value

Present Value is the current worth of a future sum of money or stream of cash flows, given a specified rate of return.

Compound Interest

Calculating interest by considering the base amount of a deposit or loan and adding the interest accrued across preceding periods.

Capital Investment

involves the procurement of funds or physical assets with the anticipation of generating future returns or growth in value.