Question

M. In accordance with Generally Accepted Accounting Principles, Bust-a-Move Snowboard must record their inventory in accordance with the Lower Cost or Market concept. Use the indirect method when recording your proposed entry. Inventory is inclusive of the following: Replacement Profit Inventory Item # of Items Cost Cost Selling Price Costs to Sell Margin Bindings T 585 52.00 5 55.00 65.00 5 5,00 23% Snowboards 345 S 131.00 $ 127.50 $ 250.00 $ 15.00 4 Boots 144 S 41.00 $ 55.00 $ 55.505 5.00 Helmets 1,000 $25.00 $ 20.00 $ 35.00 $ 2.50||

Answer 1

Entry For Recording Loss
ledger Head	Debit	Credit
Loss on Inventory being Less than the Market Value	6,207.50
Inventory		6,207.50
Loss recorded for Inventory - Market Value Less than the Cost

Working/Explanation

Under US GAAP , Inventory is valued at Lower of Cost and market Value .market Value being lower of Replacement Cost and Net realisable value [NRV]. NRV is the estimated selling Price less any costs necessary to make the sale,

Inventory Item	No of Items	Cost	Replacement Cost	Selling Price	Cost to Sell	NRV= Selling Price-Cost to Sell	Market Value= Lower of Replacement value or NRV	Loss=                         Cost - Market value/                           Market value > Cost , 0)	Loss Per Unit * No of Items
Bindings	58	52	55	65	5	60	55	0	-
Snowboards	345	131	127.5	250	15	235	127.5	3.5	1,207.50
Boots	144	41	55	55.5	5	50.5	50.5	0	-
Helmets	1000	25	20	35	2.5	32.5	20	5	5,000.00
						Total Loss to be Provided For			6,207.50