Asked by bryan chavez on Jun 26, 2024
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Walker Tile Shop uses the lower of cost or market method and has a periodic inventory system.Additional information follows:
Inventory Date cost Market January 1,2010$4,600$4,000 December 31,20106,0005,000 December 31.20119,0008,200\begin{array}{lll}&\text { Inventory}\\\text { Date}&\text { cost}&\text { Market}\\\text { January } 1,2010 & \$ 4,600 & \$ 4,000 \\\text { December } 31,2010 & 6,000 & 5,000 \\\text { December } 31.2011 & 9,000 & 8,200\end{array} Date January 1,2010 December 31,2010 December 31.2011 Inventory cost$4,6006,0009,000 Market$4,0005,0008,200 Required:
a. If the direct method of recording the reduction of inventory to market is in use, what would be the amount of the debit to Inventory on December 31, 2011?
b. If the allowance method is in use, what would be the debit to Income Summary on December 31,2010 ?
Lower of Cost or Market
A valuation rule that requires inventory to be recorded at the lower of the original cost or the current market value.
Periodic Inventory System
An inventory accounting system where the inventory count is physically conducted at specific periods, leading to adjustments in the accounts at each period end.
Inventory Cost
The total cost associated with acquiring, storing, and preparing goods for sale, including purchase price, storage, and handling costs.
- Apply the lower of cost or market rule to inventory valuation for both individual items and the inventory as a whole.
Verified Answer
Learning Objectives
- Apply the lower of cost or market rule to inventory valuation for both individual items and the inventory as a whole.
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