9.1Violet Company's records reported an inventory cost of $15,000 and a net realizable value of $14,700 at December 31, 2019.Now, Violet Company is preparing the annual financial statements dated December 31, 2020. Information about inventory stocked for regular sale follows:

QuantityUnit CostNet Realizable Value

Itemon HandWhen Acquiredat year end

A100$20 each$2,000$20 each$2,000

B8035 each 2,80040 each3,200

C20040 each 8,00036 each7,200

Instructions

Assume Violet values inventory at the lower of cost and market on an item by item basis and uses the allowance method, prepare the journal entry to record any adjustments required at the end of 2020.

9.2In 2021, Clematis Inc., had the following transaction involving equipment.

i.The company traded-in old equipment at a dealership for a newer, more efficient model. The old equipment had been purchased for $40,000 ten years ago and has since been fully depreciated using the units-of-production method. The new equipment had a fair value of $55,000 but as the old equipment was recently appraised at a fair value of $2,000, Clematis only paid $53,000 cash to the dealership for the new equipment.

Instructions: Prepare the journal entry to record the disposal and purchase of equipment.

ii.Clematis traded one of its lawnmower (cost $2,000, accumulated depreciation $1,200) for another lawn mower with a fair value of $1,300. Clematis also paid $200 to complete the transaction.

Instructions: Assuming the transaction lacks commercial substance; prepare the journal entry to record the exchange.