Question 3

Wolfe Company uses the LCNRV method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2020, consists of products D, E, F, G, H, and I. Relevant per-unit data for these products appear below.

	Item	Item	Item	Item	Item	Item
	D	E	F	G	H	I
Estimated selling price	$240	$220	$190	$180	$220	$180
Cost	150	160	160	160	100	72
Replacement cost	240	144	140	60	140	60
Estimated selling expense	60	60	60	50	60	60
Normal profit	40	40	40	40	40	40

Instructions

Using the LCNRV rule, determine the proper unit value for balance sheet reporting purposes at December 31, 2020, for each of the inventory items above.

(LCNRVValuation Account) Presented below is information related to Webby Inc.

	Jan. 31	Feb. 28	Mar. 31	Apr. 30
Inventory at cost	$21,500	$23,000	$19,010	$24,000
Inventory at the LCNRV	20,000	20,500	16,500	23,100
Purchases for the month		49,000	43,000	51,000
Sales for the month		71,000	76,000	67,000

Instructions

1. From the information, prepare (as far as the data permit) monthly income statements in columnar form for February, March,andApril.Theinventoryistobeshowninthestatementatcost,thegainorlossduetomarketfluctuationsistobe shown separately(using a valuationaccount).
2. Prepare the journal entry required to establish the valuation account at January 31 and entries to adjust it monthly thereafter.