Shipman, Inc. has 7 units in inventory on December 31. The units were purchased in November for $190 each. The price lists from suppliers indicate the current replacement cost of the item to be $186 each
What is the effect on gross profit if Shipman values its ending merchandise inventory using the lower-of-cost-or-market rule?
A) The gross profit would increase by $4.
B) The gross profit would not be affected.
C) The gross profit would decrease by $28.
D) The gross profit would increase by $28.
C .Merchandise Inventory to be written down to market value
Total amount to be written down from Merchandise Inventory
Because this will increase the cost of goods sold by $28, the gross profit will decrease by $28.
You might also like to view...
DMM Industries, a manufacturer of composite metal products, sells its products using a conventional marketing channel. The company decides to adopt a vertical marketing system to improve its performance. What advantages could this provide?
What will be an ideal response?
In a master franchising agreement, the master franchisee has the right to subfranchise to other independent businesses and thus assume the role of the local franchisor
Indicate whether the statement is true or false