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The replacement cost of a LIFO basis inventory item is below the net realizable value and above the net realizable value minus the normal profit margin. The original cost of the inventory item is below the net realizable value minus the normal profit margin. Under the lower-of-cost-or-market (LCM) method, the inventory item should be measured at:_________.
A. Original cost.
B. Replacement cost.
C. NRV.
D. NRV - Profit Margin.

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Answer:

Option B is correct. Replacement Cost

Explanation:

According to LCM method, the inventory must be recorded at lowest of cost or Market value. The market value of the asset is replacement value and this is the cost at which the inventory must be recorded. This replacement cost is always greater than the net realizable value which is equal to the difference between the Market value and cost to sell.

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