Question $1$

Mary's Nursery uses a perpetual inventory system. At December $31,$ the perpetual inventory records

indicate the following quantities of a particular blue spruce tree.

A year$-$end physical inventory, however, shows only $310$ of these trees on hand.

In its financial statements, Mary's Nursery value 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 loss account.$)$

Required:

Prepare the journal entries required to adjust the inventory records at year$-$end, assuming that

Mary's Nursery uses $(1)$ Average cost, $(2)$ Last in First out.