Check your answer
Write your response and explain your reasoning.
Northstar's ordinary non-LIFO, non-retail item costs $1,120. A supported ordinary-course selling price is $1,200. Completion costs are $80, disposal costs are $35, and transportation costs are $25.
A separate LIFO item costs $1,010. Its supported NRV is $1,080, normal profit is $140, and current replacement cost is $900.
Build NRV, route each population, compute both carrying amounts and write-downs, and prepare the adjustment amounts. Explain why the LIFO replacement cost stops at the floor and state what the calculations cannot establish. Use ASC 330-10-35-1A through 35-1C and ASC 330-10-35-14.
Compare your reasoning with the worked answer
The ordinary item's NRV is $1,060: $1,200 selling price less $80 completion, $35 disposal, and $25 transportation costs. Because the item uses neither LIFO nor the retail method, compare $1,120 cost directly with NRV. Carrying amount is $1,060 and the write-down is $60.
The separate LIFO item uses the retained market path. Its $1,080 NRV is the ceiling. Subtract $140 normal profit to obtain a $940 floor. The $900 replacement cost falls below the floor, so designated market is $940. Compared with $1,010 cost, the write-down is $70.
Do not transfer the floor to the ordinary item. The calculations cannot prove the cost methods, estimate support, application level, framework, or later reversal conclusion. Under US GAAP, the reduced year-end amount becomes cost for later accounting under ASC 330-10-35-14. Research IAS 2 separately for an IFRS reporter.