LOB$-1$ through L$08-3$PROBLEM $8\mathrm{.}4$AYear$-$End Adjustments;Shrinkage Losses and LCMrecords indicate the following quantities of a particular blue spruce tree:Mary's Nursery uses a perpetual inventory particula December the perpetual inventoryQuantity Unit Cost Total Cost$130$$$25\mathrm{.}00$$ $3,250$First purchase $($oldest$)12028\mathrm{.}503,420$Second purchase$10039\mathrm{.}003,900$Third purchase$350$$$10,570$TotalA year$-$end physical inventory, however, shows only $310$ of these trees on hand.Yes tinancial statements, Mary's Nursery values its inventories at the lower$-$of$-$cost$-$or$-$market.At year$-$end, the per$-$unit replacement cost of this tree is $$40.$ Use $$3,500$ as the level of materiality" in deciding whether to debit losses to Cost of Goods Sold or to a separate losInstructionsPrepare the journal entries required to adjust the inventory records at year$-$end, assuming that:a$.$ Mary's Nursery uses:$1.$ Average cost$\mathrm{.}2.$ Last$-$in$,$ first$-$out.b$.$ Mary's Nursery uses the first$-$in$,$ first$-$out method. However, the replacement cost of the trees at year$-$end is $$20$ apiece, rather than the $$40$ stated originally. $[$Make separate journal entries to record $(1)$ the shrinkage losses and $(2)$ the restatement of the inventory at a market value lower than cost. Record the shrinkage losses first.$]$Assume that the company had been experiencing monthly inventory shrinkage of $30$ to $60$ trees for several months. In response, management placed several hidden security cameras throughout the premises. Within days, an employee was caught on film loading potted trees into his pickup truck. The employee's attorney asked that the case be dropped because the company had "unethically used a hidden camera to entrap his client." Do you agree with the attorney? Defend your answer.