Question: Based on a physical inventory taken on December 31, 2011, Chewy Co. determined its chocolate inventory on a FIFO basis at $26,000 with a replacement

Based on a physical inventory taken on December 31, 2011, Chewy Co. determined its chocolate inventory on a FIFO basis at $26,000 with a replacement cost of $20,000.

Chewy estimated that, after further processing costs of

$12,000, the chocolate could be sold as finished candy bars for $40,000. Chewy’s normal profit margin is 10% of sales.

Under the lower of cost or market rule, what amount should Chewy report as chocolate inventory in its December 31, 2011 balance sheet?

a. $28,000

b. $26,000

c. $24,000

d. $20,000

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