Applying the lower-of-cost-or-market rule [5-10 min]
Assume that a Rocket Burger restaurant has the following perpetual inventory record for hamburger patties:
Hamburger Patties | |||
Date | Purchases | Cost of Goods Sold | Inventory on Hand |
Feb 9 | $ 470 |
| $ 470 |
22 |
| $ 280 | 190 |
28 | 210 |
| 400 |
Requirements
1. At February 28, the accountant for the restaurant determines that the current replacement cost of the ending inventory is $447. Make any adjusting entry needed to apply the lower-of-cost-or-market rule. Inventory would be reported on the balance sheet at what value on February 28?
2. Inventory would be reported on the balance sheet at what value if Rocket uses the average-cost method?
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