Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting And Social Theory An Introduction

Authors: Lisa Jack

1st Edition

1138100714, 9781138100718

More Books

Students also viewed these Accounting questions

Question

Goodwill is the purchase of existing customers. True/False?

Answered: 1 week ago

Question

2. In what way can we say that method affects the result we get?

Answered: 1 week ago