Inventory Valuation And Write-Downs Practice Test

At its year-end, Omega Corp. holds a single product in inventory that was acquired for $120 per unit. The company uses the FIFO inventory costing method. Additional information for the product is as follows:

• Estimated selling price: $150 per unit
• Estimated costs to complete and sell: $40 per unit
• Current replacement cost: $115 per unit

Vertex Industries uses the LIFO inventory cost method. At December 31, Year 1, an inventory item has a cost of $500. Additional data for this item is as follows:

• Replacement cost: $460
• Selling price: $520
• Costs to complete and sell: $40
• Normal profit margin: 10% of selling price