Alberto Company uses the lower-of-cost-or-market method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2019, consists of products D, E, F, G, H, and I. Relevant per-unit data for these products appear below. Item D Item E Item F Item G Item H Item I Quantity on hand 18 15 10 25 15 30 Original Cost $75 $80 $80 $80 $50 $36 Replacement cost $120 $72 $70 $30 $70 $30 Selling price $120 $110 $95 $90 $110 $90 Estimated selling expense $30 $28 $24 $23 $28 $23 Normal profit $24 $22 $19 $18 $22 $18 Based upon data, what is the balance of merchandise inventory before application of LCM principle? Answer: What would be the adjusted balance of merchandise inventory after application of LCM Principle? Answer: Provide the adjusting journal entry that company has to make to reflect compliance with LCM principle. Debit Credit
Data for the next 3 questions: Alberto Company uses the lower-of-cost-or-market method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2019, consists of products D, E, F, G, H, and I. Relevant per-unit data for these products appear below.
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Item D |
Item E |
Item F |
Item G |
Item H |
Item I |
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Quantity on hand |
18 |
15 |
10 |
25 |
15 |
30 |
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Original Cost |
$75 |
$80 |
$80 |
$80 |
$50 |
$36 |
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Replacement cost |
$120 |
$72 |
$70 |
$30 |
$70 |
$30 |
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Selling price |
$120 |
$110 |
$95 |
$90 |
$110 |
$90 |
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Estimated selling expense |
$30 |
$28 |
$24 |
$23 |
$28 |
$23 |
|
Normal profit |
$24 |
$22 |
$19 |
$18 |
$22 |
$18 |
- Based upon data, what is the balance of merchandise inventory before application of LCM principle?
Answer:
- What would be the adjusted balance of merchandise inventory after application of LCM Principle?
Answer:
- Provide the
adjusting journal entry that company has to make to reflect compliance with LCM principle.
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Data for the next 6 questions: You are accountant for New Horizon Merchandising Company. New Horizon Merchandising Company buys and sells a product called Zoom. Company uses Perpetual Inventory System with LIFO method for
On January 1, 2019, New Horizon’s merchandise inventory on hand consisted of the following:
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Zoom: |
Quantity |
Cost per Unit |
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1st Purchase |
200 |
$4 |
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2nd Purchase |
110 |
$5 |
- New Horizon Company purchased 300 units of Zoom at $5.50 each plus $99 sales taxes. Terms were 2/10, n/30, FOB Shipping Point.Shipping cost was $51.Provide the necessary journal entry to record the transaction.
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Debit |
Credit |
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- Assume New Horizon paid for the above purchase within discount period. Provide the necessary journal entry to record the transaction.
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Debit |
Credit |
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- Assume New Horizon paid for the above purchase after the discount period. Provide the necessary journal entry to record the transaction.
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Credit |
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- New Horizon sold 500 units of Zoom for $15 each plus 8% sales taxes on account to Nice Company.Terms were 2/10, n/30, FOB Destination.New Horizon paid $100 for shipping the merchandise to Nice Company. Provide the necessary journal entry to record the transaction.
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Credit |
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- Assume New Horizon collected from Nice Company for the above sales within discount period. Provide the necessary journal entry to record the transaction.
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Debit |
Credit |
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- Assume New Horizon collected from Nice Company for the above sales after the discount period. Provide the necessary journal entry to record the transaction.
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Credit |
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- Shaw Company purchased 2000 units of a merchandise (called XOM) for sale at a cost of $10 per unit from Reynold Company on account. Sales taxes was 6% which was not included in the price. Shaw Company was charged $150 for shipping and handling. Terms were 2/10, n/30.
Provide the necessary journal entry to record the transaction using Gross Method.
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