The Original Cost of an Inventory Item Is Above the Replacement

question 27

Multiple Choice

The original cost of an inventory item is above the replacement cost. The replacement cost is below the net realizable value less the normal profit margin. Under the lower of cost or market method the inventory item should be priced at its

• A) Original cost
• B) Replacement cost
• C) Net realizable value
• D) Net realizable value less the normal profit margin

---

Definitions:

Cash Dividends

Payments made by a corporation to its shareholder members. It is the share of profits distributed.

Mikel Company Bonds

Debt securities issued by Mikel Company to investors, representing loans made by investors to the company.

Purchase

The act of buying goods, services, or assets in exchange for money or its equivalent.

Annual Interest

The total amount of interest to be paid or earned over the course of a year, typically associated with loans or investments.