Question #$5$

Madison Co$.$ has determined its year$-$end inventory on a LIFO basis to be $$600,000.$ Information

pertaining to that inventory is as follows:

Selling price

Costs to sell

Normal profit margin

Replacement cost

$$720,000$

$30,000$

$80,000$

$620,000$

Based on the Lower of Cost or Market Value, what should be the reported value of Madison's

inventory?

Question #$6$

On July $8,$ a fire destroyed the entire merchandise inventory on hand at Andover Wholesale

Corporation. The following information is available:

Sales, January $1$ through July $8$

$$700,000$

Inventory, January $1$

$130,000$

Purchases, January $1$ through July $8$

$640,000$

Gross profit ratio

$30\%$

Based on the Gross Profit Method, what is the estimated inventory on July $8$ immediately prior

to the fire?