of HCl 4. Magic Carpets Inc. sells a full line of area rugs, from top quality to bargain basement. Economic conditions have hit the textile industry, and Magic Carpets accountant is concerned that its rug inventory may not worth the amount Magic paid for it. Information about three lines of rugs is found below: Cost Sales Price $230 $250 Number in inventory High Flyers Midflight Under the Radar Cost to Sell $40 25 150 220 125 100 110 20 165 1. Determine market value for each type of rug. 2. Determine lower-of-cost or market for each type of rug. 3. Determine if Magic Carpets has suffered a loss of value on its inventory, and if so, what the amount of loss is 5. Costello Corporation uses a perpetual inventory system. At the end of the year, the inventory balance reported by its system is $45,270. Costello performs an inventory count and determines that the actual ending inventory is $39,780. 1. Discuss why a company that uses a perpetual inventory system would perform a physical inventory count. 2. Why might the ending balance in inventory differ between the perpetual inventory system and physical inventory count? 3. Assume that Costello believes the difference is due to errors made by its accounting staff and this is a normal risk in tracking inventary. Record the journal entry Costello should make in this case. 6. Fabulous Fay's is a boutique clothing store in San Diego. Fay's uses a perpetual inventory system. In March, Fay's purchased a type of swimwear designed to be slimming to the wearer. It purchased twenty suits of varying sizes for $46 each and priced them at $120 each. They sold out almost immediately. 90 Fay purchased forty more suits in April for $40 each and sold thirty-eight of them for $130 each. Again in July, Fay made one more purchase of twenty suits at 540 each and sold fifteen of them for $130 each. Fay decided not to put the rest of her inventory on sale at the end of the summer, but to hold onto it until Cruise season started the following winter. She believed she could sell the rest then without having to mark them down. 1. Make the journal entries for the purchases Fay made. 2. Make the journal entries for the sales Fay made. 3. Determine the balance in ending inventory on December 31 4. Fay performed a physical count on December 31 and determined that three of the swimsuits had been severely damaged due to a leaky pipe. Make the Journal entry to show the loss of this inventory