At $12/31/22,$ the end of Jenner Company's first year of business, inventory was $$6,100$ and $$5,100$ at cost and at market, respectively.

Following is data relative to the $12/31/23$ inventory of Jenner:

Original Net Net Realizable Appropriate

Cost Replacement Realizable Value Less Inventory

Item Per Unit Cost Value Normal Profit Value

A $ $\mathrm{.}65$ $ $\mathrm{.}45$

B $\mathrm{.}45\mathrm{.}40$

C $\mathrm{.}70\mathrm{.}75$

D $\mathrm{.}75\mathrm{.}65$

E $\mathrm{.}90\mathrm{.}85$

Selling price is $$1\mathrm{.}00/$unit for all items. Disposal costs amount to $10\%$ of selling price and a "normal" profit is $30\%$ of selling price. There are $1,500$ units of each item in the $12/31/21$ inventory.

Instructions

$($a$)$ Prepare the entry at $12/31/20$ necessary to implement the lower$-$of$-$cost$-$or$-$market procedure assuming Jenner uses a contra account for its balance sheet.

$($b$)$ Complete the last three columns in the $12/31/21$ schedule above based upon the lower$-$of$-$cost$-$or$-$market rules.

$($c$)$ Prepare the entry$($ies$)$ necessary at $12/31/21$ based on the data above.

$($d$)$ How are inventory losses disclosed on the income statement?

B$.$ On January $1,$ a store had inventory of $$48,000.$ January purchases were $$46,000$ and January sales were $$95,000.$ On February $1$ a fire destroyed most of the inventory. The rate of gross profit was $25\%$ of cost$.$ Merchandise with a selling price of $$5,000$ remained undamaged after the fire. Compute the amount of the fire loss, assuming the store had no insurance coverage. Label all figures.

C$.$ When you undertook the preparation of the financial statements for Telfer Company at January $31,2021,$ the following data were available:

At Cost At Retail

Inventory, February $1,2020$ $$70,800$ $ $98,500$

Markdowns $35,000$

Markups $63,000$

Markdown cancellations $20,000$

Markup cancellations $10,000$

Purchases $219,500294,000$

Sales revenue $335,000$

Purchases returns and allowances $4,3005,500$

Sales returns and allowances $10,000$

Instructions

Compute the ending inventory at cost as of January $31,2021,$ using the retail method which approximates lower of cost or market. Your solution should be in good form with amounts clearly labeled.

D$.$ Capitalizing acquisition costs. $($Critical Thinking and Writing Skills$)$

Gibbs Manufacturing Co$.$ was incorporated on $1/2/23$ but was unable to begin manufacturing activities until $8/1/20$ because new factory facilities were not completed until that date. The Land and Buildings account at $12/31/23$ per the books was as follows:

Date Item Amount

$1/31/20$ Land and dilapidated building $$200,000$

$2/28/20$ Cost of removing building $4,000$

$4/1/20$ Legal fees $6,000$

$5/1/20$ Fire insurance premium payment $5,400$

$5/1/20$ Special tax assessment for streets $4,500$

$5/1/20$ Partial payment of new building construction $210,000$

$8/1/20$ Final payment on building construction $210,000$

$8/1/20$ General expenses $30,000$

$12/31/20$ Asset write$-$up $75,000$

$$744,900$

Additional information:

$1.$ To acquire the land and building on $1/31/20,$ the company paid $$100,000$ cash and $1,000$ shares of its common stock $($par value $=$ $$100/$share$)$ which is very actively traded and had a fair value per share of $$180.$

$2.$ When the old building was removed, Gibbs paid Kwik Demolition Co$.$ $$4,000,$ but also received $$1,500$ from the sale of salvaged material.

$3.$ Legal fees covered the following:

Cost of organization $$2,500$

Examination of title covering purchase of land $2,000$

Legal work in connection with the building construction $1,500$

$$6,000$

$4.$ The fire insurance premium covered premiums for a three$-$year term beginning May $1,2020.$

$5.$ General expenses covered the following for the period $1/2/20$ to $8/1/20.$

President's salary $$20,000$

Plant superintendent covering supervision of new building $10,000$

$$30,000$

$6.$ Because of the rising land costs, the president was sure that the land was worth at least $$75,000$ more than what it cost the company.

Instructions

$1.$ Explain the accounting situation in Gibbs Manufacturing Co$.$ general ledger related to fixed assets.

$2.$ How the situation is fix?

$3.$ Explain the transaction of December $31,2020$ and present the correct accounting entry.

$4.$ Determine the proper balances as of $12/31/20$ for fixed assets. Use separate T$-$accounts labeling all the relevant amounts and disclosing all computations.