Question
At 12/31/20, the end of Carla Vista Company's first year of business, inventory was $7,500 and $5,450 at cost and at market, respectively. Following is
At 12/31/20, the end of Carla Vista Company's first year of business, inventory was $7,500 and $5,450 at cost and at market, respectively.
Following is data relative to the 12/31/21 inventory of Jenner:
Item
Original Cost
Per Unit
Replacement
Cost
A $0.55 $0.30
B 0.55 0.50
C 0.80 0.85
D 0.90 0.80
E 0.90 0.85
Selling price is $1.00/unit for all items. Disposal costs amount to 10% of selling price and a "normal" profit is 30% of selling price. There are 1,800 units of each item in the 12/31/21 inventory.
Prepare the entry at 12/31/20 necessary to implement the lower-of-cost-or-market procedure assuming Carla Vista uses a contra account for its balance sheet. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Date Account Titles and Explanation Debit Credit
12/31/20
Complete the last three columns in the 12/31/21 schedule below based upon the lower-of-cost-or-market rules.
Item Original Cost Per Unit Replacement Cost Net Realizable Value Net Realizable Value Less Normal Profit Appropriate Inventory Value
A $0.55 $0.30 $ $ $
B 0.55 0.50
C 0.80 0.85
D 0.90 0.80
E 0.90 0.85 $ $
Prepare the entries necessary at 12/31/21 based on the data above. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Date Account Titles and Explanation Debit Credit
12/31/21
(To record cost of goods sold)
12/31/21
(To record profit/ loss)
How are inventory losses disclosed on the income statement?
Inventory losses can be disclosed separately below
or they can be shown as part of
.
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