Question

Please show all work

5. ABCD Co. has determine its yearend inventory on a conventional retail inventory basis to be S53.2 million. Information pertaining to the inventory is as follows -Sale Price: $70.0 million - Cost to Sell: $7.5 million -Normal Profit: $10.0 million -Replacement Cost:$49.5 million What yearend inventory value should be reported (5 point)? 6. ABCD Co.'s has sold S50,000,000 of goods in 2018 with product warranty to cover any defeat in the first year. It is estimated the cost of warranty is about 2% of the sale. The record indicated the following: In 2018, the company spent $500,000 to cover the warranty and in 2019, the company spend $700,000 to cover the warranty. Record the all necessary journal entries (in 2018 and 2019) on how warranty liability to be established and spent (4 points)

Answer 1

5. Inventory should be reported at cost or net realisable value whichever is lower:

Cost = $ 49.5 million

Net Realisable Value = Sale price - Cost to sell

= $ (70 - 7.5) million

= $ 62.5 million

So, the yearend inventory value to be reported = $ 49.5 million

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