L06-3, L06-6 LEM 6.7A l Accounting. Cash ind Fair Value 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. 3 Sept. 15 Sept. 28 Oct. 3 Oct. 15 Oct. 27 Purchased $240,000 of plumbing accessories, terms n/30. Sold $180,000 of plumbing accessories, terms n/60. The cost of the accessories sold is $120,000. Purchased $360,000 of plumbing accessories, terms n/45. Settled the $240,000 purchase of September 3. Sold $450,000 of plumbing accessories, terms n/60. The cost of the accessories sold is $300,000. Purchased $540,000 of plumbing accessories, terms n/30. Instructions a. Compute the gross profit on Thompson Plumbing's transactions during September and October. b. Compute the gross profit on Thompson Plumbing's transactions during September and October if a cash-basis accounting system was used. e. Explain the difference between the results in a and b. d. 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. Pre- pare 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 differ ence between fair value and book value with the offset to an account titled Revaluation of Inventory to Market Value.)