Question 3 (continued Part B (5 marks) The information shown below relating to the ending inventory was taken at lower of cost or NRV from the records of Components Corporation: Per Unit Inventory Classification Quantity Cost NRV Keyboards Stock A 12 $47 $40 Stock B 20 38 35 Stock C 18 50 55 1. Determine the valuation of the above inventory at cost and at lower of cost or NRV, assuming application of lower-of-cost-or NRV valuation by individual items. (2 marks) Inventory at cost: Inventory at Lower of Cost or NRV: 2. Give the entry to record the writedown, if any, to reduce ending inventory to lower of cost or NRV. Assume periodic inventory and the allowance method. (3 marks) Debit Credit Part C (5 marks) You are auditing the records of Omega Corporation. The company took a physical inventory under your observation. However, the valuations have not been completed. The records of the company provide the following data: sales, $800,000 (gross); returned sales, $35,000 (returned stock); purchases (gross), $500,000; beginning inventory, $32,000; freight-in $16,000; and purchase returns and allowances, $14,000. You anticipate that the gross margin will average 30% of net sales for the year under audit. Required: Compute the cost of goods available for sale and estimate the cost of the ending inventory using the gross margin method. Show all calculations. Cost of goods available for sale: Part B 6 marks) The information shown below relating to the ending inventory was taken at lower of cost or NRV from the records of Components Corporation: Per Unit Inventory Classification Quantity Cost NRV Keyboards Stock A 12 S47 $40 Stock B 20 38 35 Stock C 18 50 55 1. Determine the valuation of the above inventory at cost and at lower of cost or NRV, assuming application of lower-of-cost-or NRV valuation by individual items. (2 marks) Inventory at cost: Inventory at Lower of Cost or NRV. 2. Give the entry to record the writedown, if any, to reduce ending inventory to lower of cost or NRV. Assume periodic inventory and the allowance method. (3 marks) Debit Credit Part C (5 marks) You are auditing the records of Omega Corporation. The company took a physical inventory under your observation. However, the valuations have not been completed. The records of the company provide the following data: sales, $800,000 (gross); returned sales, S35,000 (returned stock); purchases (gross), S500,000; beginning inventory, $32,000; freight-in $16,000; and purchase returns and allowances, $14,000. You anticipate that the gross margin will average 30% of net sales for the year under audit. Required: Compute the cost of goods available for sale and estimate the cost of the ending inventory using the gross margin method. Show all calculations. Cost of goods available for sale: Cost of the ending inventory
