Problem - 2 Parts

Part A

Retool Inc. has the following information related to an item in its ending inventory. Product ABC has a

cost of $6,500, a replacement cost of $6,100, a net realizable value of $6,200, and a normal profit margin

of $400. What is the final lower-of-cost or market inventory value for product ABC?

Part B

The following information is available for October for Blue Company.

• Beginning inventory $ 50,000
• Purchases, net 175,000
• Sales, net 400,000
• Gross margin 60%

A fire destroyed most of Blues inventory on October 31, leaving undamaged inventory with a cost of

$3,000. Using the gross profit method, estimate the amount of inventory destroyed by the fire.