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Data related to the inventories of Alpine Ski Equipment and Supplies is presented below: Skis Boots Apparel Supplies Selling price $ 160,000 $ 157,000 $ 119,000 $ 65,000 Cost 139,000 140,000 77,350 42,250 Replacement cost 134,000 126,000 97,350 38,250 Sales commission 10 % 10 % 10 % 10 % In applying the lower of cost or net realizable value rule, the inventory of skis would be valued at:

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Answer:

$139,000

Explanation:

Note: The data in the question are merged and they are first sorted before answering the question as follows:  

                                  Skis         Boots       Apparel          Supplies

Selling price            $160,000   $157,000   $119,000        $65,000

Cost                           139,000      140,000      77,350           42,250

Replacement cost     134,000      126,000      97,350           38,250

Sales commission           10%            10%            10%               10%

Explanation to the answer is now as follows:

Skis' cost = $139,000

Skis' net realizable value = $160,000 - ($160,000 * 10%) = $144,000

Since the cost of Skis of $139,000 is lower than its $144,000 net realizable value, Skis would be valued at $139,000.

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