Applying the lower-of-cost-or-market rule to inventories [5 min]Richmond Sporting Goods, w...

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

Richmond Sporting Goods, which uses the FIFO method, has the following account balances at August 31, 2012, prior to releasing the financial statements for the year:

Richmond has determined that the replacement cost (current market value) of the August 31, 2012, ending inventory is $13,500.

Requirements

1. Prepare any adjusting journal entry required from the information given.

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2. What value would Richmond report on the balance sheet at August 31, 2012, for inventory?