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6 ABC uses a periodic inventory system, and the ending inventory for each year is determined by taking a complete physical inventory at year-end. A
6 | ABC uses a periodic inventory system, and the ending inventory for each year is determined by taking a complete | ||||||||||
physical inventory at year-end. A physical count was taken on December 31, 2014, and the inventory on-hand at | |||||||||||
that time totaled $75,000, which reflects historical cost. | |||||||||||
Record the 2014 Cost of Goods Sold and the 12/31/14 Inventory adjustment. | |||||||||||
Additionally, ABC adheres to GAAP by recording ending inventory at the lower of cost and net realizable value at a total inventory level. | |||||||||||
A review of inventory data further indicated that the current retail sales value of the ending inventory is $110,000 and estimated costs of | |||||||||||
completion and shipping is 15% of retail. Be sure to make an additional adjustment, if necessary, to properly value ending inventory | |||||||||||
using the Loss and Allowance methodology. For Income Statement presentation purposes, be sure to use the Loss Method for accounting | |||||||||||
for adjustments of inventory to market value. | |||||||||||
7 | It would be unusual for a company to have an asset impairment in Year 1, but for the sake of this example, ABC realized | ||||||||||
that their intangible asset might be impaired on December 31, 2014. Record the impairment if any. | |||||||||||
The expected future net cash flows for this intangible asset totals $30,000, and the fair value of the asset is $27,500. | |||||||||||
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