The Rock Shop shows the following data related to an item of inventory:
Inventory, January 1 100 units @ $5.00
Purchase, January 9 300 units @ $5.40
Purchase, January 19 70 units @ $6.00
Inventory, January 31 100 units
(a) What value should be assigned to the ending inventory using FIFO?
(b) What value should be assigned to cost of goods sold using LIFO?
At 12/31/12, the end of Jenner Company’s first year of business,
inventory was $4,100 and $2,800 at cost and market, respectively.
Following is data relative to the 12/31/13 inventory of Jenner:
Original Net Net Realizable Appropriate
Cost Replacement Realizable Value Less Inventory
Item Per Unit Cost . Value . Normal Profit Value .
A $.65 $.45 __________________________________
B .45 .40 ___________________________________
C .70 .75 ___________________________________
D .75 .65 ____________________________________
E .90 .85 ____________________________________
price is $1.00/unit for all items. Disposal costs amount to 10% of
selling price and a “normal” profit is 30% of selling price. There are
1,000 units of each item in the 12/31/13 inventory.
Prepare the entry at 12/31/12 necessary to implement the
lower-of-cost-or-market procedure assuming Jenner uses a contra account
for its balance sheet.
(b) Complete the last three columns of the 12/31/13 schedule above based upon the lower-of-cost-or-market rules.
(c ) Prepare the entry(ies) necessary at 12/31/13 based on the data above.
(d) How are inventory losses disclosed on the income statement.
3. A machine cost $140,000, has annual depreciation expense of
$28,000, and has accumulated depreciation of $70,000 on December 31,
2012. On April 1, 2013, when the machine has a fair value of $56,000, it
is exchanged for a similar machine with a fair value of $168,000 and
the proper amount of cash is paid. The exchange lacked commercial
Prepare all entries that are necessary on April 1, 2013.
A machine which cost $300,000 is acquired on October 1, 2012. Its
estimated salvage value is $30,000, and its expected life is eight
Calculate depreciation expense for 2012 and 2013 by each of the following methods, showing the figures used.
(a) Double-declining balance