Problem

Applying the lower-of-cost-or-market rule to inventories [5 min]Rocky Bayou Golf Clubs, wh...

Applying the lower-of-cost-or-market rule to inventories [5 min]

Rocky Bayou Golf Clubs, which uses the FIFO method, has the following account balances at July 31, 2012, prior to releasing the financial statements for the year:

Rocky Bayou has determined that the replacement cost (current market value) of the July 31, 2012, ending inventory is $13,000.

Requirements

1. Prepare any adjusting journal entry required from the information given.
2. What value would Rocky Bayou report on the balance sheet at July 31, 2012, for inventory?