Assume that the fair value of Thompson Plumbing$’$s inventory at October $31$ is $$900,000.$ A potential lender asks Thompson Plumbing to prepare a fair$-$value$–$based balance sheet. Prepare the journal entry to reflect inventory at fair value. Comment on how a wholesaler might determine fair value for inventory items. $($Hint: Increase the Inventory account by the difference between fair value and book value with the offset to an account titled Revaluation of Inventory to Market Value.$)$ PROBLEM $6\mathrm{.}7$A Accrual Accounting, Cash Flow, and Fair Value LO$6-1,$ LO$6-3,$ LO$6-6$

Page $284$Thompson Plumbing Inc. is a wholesaler of plumbing accessories. Thompson Plumbing began operations in September of the current year and engaged in the following transactions during $-$September and October of this year. Thompson Plumbing uses a perpetual inventory system.

Sept$\mathrm{.}3$ Purchased $$240,000$ of plumbing accessories, terms n$/30.$

Sept. $15$ Sold $$180,000$ of plumbing accessories, terms n$/60.$ The cost of the accessories sold is $$120,000.$

Sept. $28$ Purchased $$360,000$ of plumbing accessories, terms n$/45.$

Oct$\mathrm{.}3$ Settled the $$240,000$ purchase of September $3.$

Oct$\mathrm{.}15$ Sold $$450,000$ of plumbing accessories, terms n$/60.$ The cost of the accessories sold is $$300,000.$

Oct$\mathrm{.}27$ Purchased $$540,000$ of plumbing accessories, terms n$/30.$