SuperStore Limited is a huge retailer of consumer goods with stores in Western Canada. There have been some problems with the perpetual inventory system during the year, and, as a result, the company has been very particular in performing the year-end count of Goods for Resale at December 31, 2023. You are auditing the company's inventory records and have the following information to work with.

1. The total of the inventory as counted is $50 million.
2. The Kelowna store has included in its inventory list $250,000 worth of goods that were shipped to it on December 31, 2023, f.o.b. Kelowna. The goods were still in transit at year end.
3. A shipment between the Vancouver and Victoria stores in the amount of $150,000 had been shipped f.o.b. Vancouver and was included in the inventory count for both stores.
4. The stores sell some consignment items for artists in each local area. The value of these items has been included in the inventory for the Canmore store as $200,000. The other stores did not count these items, but you have been able to determine that the value of the items at the other stores is $650,000.
5. The stores sell books and music under an agreement with the wholesalers that unsold goods can be returned for a full refund. The total value of these items at year end was $1 million. Historically, 20% of these items are returned for credit.
6. In reviewing the payments made subsequent to year end, you have determined that many of the items included in the inventory at the gross amount on the invoice were subject to discounts taken when payment was made. The company will accrue the discounts at the end of the fiscal year. The total of these discounts is $100,000.

As part of your audit testing, you have decided to check the costing of one large ticket item and one high volume item. Cost figures have been produced by the computerized perpetual system. You have chosen to check the valuation of snowmobiles and potato chips, which are valued using the average cost formula. The following information is available.

(i) With respect to the snowmobiles:

Inventory November 30, 2023	6 units	$63,000
Purchases in December 2023
	December 15	3 units	$30,000
	December 20	25 units	$274,200
Sales in December 2023	7 units

(ii) With respect to potato chips:

Date	Cases Purchased	Cases Sold	Balance
Dec. 1	Beginning Inventory		50,000 cases @ $2.60 = $130,000
Dec. 1-15		40,000
Dec. 16	75,000 @ $2.75
Dec. 17-25		65,000
Dec. 26	85,000 @ $2.95
Dec. 26-31		55,000

Finally, you decide that the best way to test the accuracy of the final balance is to try to estimate what the inventory number should be by using both the gross profit and retail inventory methods.

Here is the information you have collected.

Beginning inventory, at cost	$ 47,000,000
Purchases, at cost	443,000,000
Sales, at selling price	530,000,000
Gross profit %	20%
Beginning inventory, at retail	56,000,000
Purchases, at retail	532,000,000
Markups	5,000,000
Markup cancellations	1,500,000
Markdowns	3,000,000
Markdown cancellations	1,000,000

Instructions

1. Determine the correct balance for the ending inventory of Goods for Resale.
2. Determine the correct unit and total cost for snowmobiles and potato chips. Do not round interim calculations.
3. Calculate the estimated inventory balance at cost using both the gross profit and retail inventory methods(average cost method). Explain why there may be differences between these figures and the actual count performed by the company.
4. Using the revised inventory balance as calculated in Part A, assume that the net realizable value (NRV) of the inventory is $48,300,000. Prepare the journal entry required, if any, to record the inventory at the lower of cost and NRV under both the direct method and the indirect method. Assume SuperStore has not had any inventory write downs in prior years.