[Future Cpa]

Can someone please help me with this it is for extra credit and I can only figure out number 2. Just starting intermediate.Thank you

Richards Inc. pays a vendor cash of $16,050 at the beginning of the year for goods that Richards will ultimately include in its inventory. In addition, Richards associates the following costs with the purchase:

Freight in $500
Freight out 150
Normal spoilage 300
Abnormal spoilage 450
Marketing costs 100
At the end of the year, Richards is valuing the inventory in current dollars in order to prepare its financial statements. As of year-end, the inventory would have a net selling price of $17,100 with costs to complete and sell of $600. The same inventory on that date would cost Richards $16,250. Richards assumes a normal profit margin of 10% on all sales.

1. Prepare the journal entry for the inventory acquisition choice of Cash, Inventory, Inventory Gain, Inventory Loss and only two slots for entry

2. Determine the lower of cost or market value for the inventory

3. Prepare the year end journal entry for the inventory, same choices as 1 and only space for two entries

4.If Richard used IFRS, determine the lower of cost or net realizable value for the inventory.

5.Prepare the year end journal entry for the inventory under IFRS
Same choices as 1/3 and two journal slots

[Anonymous]

This was a SIM I did yesterday
1) J/E (inventory cost will include freight-in and normal spoilage and will exclude freight out and marketing costs as well as abnormal spoilage)
So DR Inventory for 16,850
CR 16850

[Anonymous]

2) Lower cost or Market. Market is the middle value between NRV (selling price-costs to complete)=16,500, replacement cost is outlined in the problem at $16,250. The “floor” is NRV less profit margin (10% of 17,100)= 14,790. Thus between these three, the one in the middle is $16,250. Since your cost is $16,850, we use the lower of and re-value our inventory at $16,250
the 3)J/E DR Inventory Loss $600, CR Inventory $600

If the company uses IFRS then it's lower of cost or NRV. Since NRV is lower, we adjust invenotry to $16,500

JE DR Inventory Loss $350
CR Inventory Loss $350

[Author]

Replies