Lower-of-cost-or-market.
At 12/31/14, the end of Jenner Company's first year of business, inventory was $4,100 and $2,800 at cost and at market, respectively.Following is data relative to the 12/31/15 inventory of Jenner: Selling 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 12/31/15 inventory.
Instructions

(a) Prepare the entry at 12/31/14 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 in the 12/31/15 schedule above based upon the lower-of-cost-or-market rules.
(c) Prepare the entry(ies) necessary at 12/31/15 based on the data above.
(d) How are inventory losses disclosed on the income statement?

Question

Lower-of-cost-or-market.
At 12/31/14, the end of Jenner Company's first year of business, inventory was $4,100 and $2,800 at cost and at market, respectively.Following is data relative to the 12/31/15 inventory of Jenner:  Selling 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 12/31/15 inventory.
Instructions

(a) Prepare the entry at 12/31/14 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 in the 12/31/15 schedule above based upon the lower-of-cost-or-market rules.
(c) Prepare the entry(ies) necessary at 12/31/15 based on the data above.
(d) How are inventory losses disclosed on the income statement?

Quizplus · Accepted Answer

The Answer of Lower-of-cost-or-market.
At 12/31/14, the end of Jenner Company's first year of business, inventory was $4,100 and $2,800 at cost and at market, respectively.Following is data relative to the 12/31/15 inventory of Jenner:  Selling 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 12/31/15 inventory.
Instructions

(a) Prepare the entry at 12/31/14 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 in the 12/31/15 schedule above based upon the lower-of-cost-or-market rules.
(c) Prepare the entry(ies) necessary at 12/31/15 based on the data above.
(d) How are inventory losses disclosed on the income statement?

Lower-Of-Cost-Or-Market. at 12/31/14, the End of Jenner Company's First Year of of Business