Lower-of-cost-or-market rule: perpetual system
The following information pertains to Royal Auto Parts’s ending inventory for the current year.
Item | Quantity | Unit Cost | Unit Market Value |
P | 100 | $6 | $7 |
D | 50 | 8 | 6 |
S | 20 | 7 | 8 |
J | 15 | 9 | 7 |
Required
a. Determine the value of the ending inventory using the lower-of-cost-or-market rule applied to (1) each individual inventory item and (2) the inventory in aggregate.
b. Prepare any necessary journal entries, assuming the decline in value is immaterial, using the (1) individual method and (2) aggregate method. Royal Auto Parts uses the perpetual inventory system.
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