Late in the year, Software City began carrying WordCrafter, a new word processing software program. At December 31, Software City's perpetual inventory records included the following cost layers in its inventory of WordCrafter programs. Purchase Date Nov. 14 Dec. 12 Total available for sale at Dec. 31 Quantity 10 24 34 Unit Cost $ 400 320 $ Total Cost $ 4,000 7,680 $11,680 a. At December 31, Software City takes a physical inventory and finds that all 34 units of WordCrafter are on hand. However, the current replacement cost (wholesale price) of this product is only $250 per unit. 1. Prepare the entries to record this write-down of the inventory to the lower-of-cost-or-market at December 31. (Company policy is to charge LCM adjustments of less than $2,000 to Cost of Goods Sold and larger amounts to a separate loss account.) 2. Prepare the entries to record the cash sale of 28 WordCrafter programs on January 9, at a retail price of $310 each. Assume that Software City uses the FIFO flow assumption. b. Now assume that the current replacement cost of the WordCrafter programs is $400 each. A physical inventory finds only 30 of these programs on hand at December 31. (For this part, return to the original information and ignore what you did in part a.) 1. Prepare the journal entry to record the shrinkage loss assuming that Software City uses the FIFO flow assumption. 2. Prepare the journal entry to record the shrinkage loss assuming that Software City uses the LIFO flow assumption.
Late in the year, Software City began carrying WordCrafter, a new word processing software program. At December 31, Software City's perpetual inventory records included the following cost layers in its inventory of WordCrafter programs. Purchase Date Nov. 14 Dec. 12 Total available for sale at Dec. 31 Quantity 10 24 34 Unit Cost $ 400 320 $ Total Cost $ 4,000 7,680 $11,680 a. At December 31, Software City takes a physical inventory and finds that all 34 units of WordCrafter are on hand. However, the current replacement cost (wholesale price) of this product is only $250 per unit. 1. Prepare the entries to record this write-down of the inventory to the lower-of-cost-or-market at December 31. (Company policy is to charge LCM adjustments of less than $2,000 to Cost of Goods Sold and larger amounts to a separate loss account.) 2. Prepare the entries to record the cash sale of 28 WordCrafter programs on January 9, at a retail price of $310 each. Assume that Software City uses the FIFO flow assumption. b. Now assume that the current replacement cost of the WordCrafter programs is $400 each. A physical inventory finds only 30 of these programs on hand at December 31. (For this part, return to the original information and ignore what you did in part a.) 1. Prepare the journal entry to record the shrinkage loss assuming that Software City uses the FIFO flow assumption. 2. Prepare the journal entry to record the shrinkage loss assuming that Software City uses the LIFO flow assumption.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Late in the year, Software City began carrying WordCrafter, a new word processing software program. At December 31, Software City's
perpetual inventory records included the following cost layers in its inventory of WordCrafter programs.
Purchase Date
Nov. 14
Dec. 12
Total available for sale at Dec. 31
Quantity
10
24
34
Unit Cost
$ 400
320
$
Total Cost
$ 4,000
7,680
$11,680
a. At December 31, Software City takes a physical inventory and finds that all 34 units of WordCrafter are on hand. However, the
current replacement cost (wholesale price) of this product is only $250 per unit.
1. Prepare the entries to record this write-down of the inventory to the lower-of-cost-or-market at December 31. (Company policy is to
charge LCM adjustments of less than $2,000 to Cost of Goods Sold and larger amounts to a separate loss account.)
2. Prepare the entries to record the cash sale of 28 WordCrafter programs on January 9, at a retail price of $310 each. Assume that
Software City uses the FIFO flow assumption.
b. Now assume that the current replacement cost of the WordCrafter programs is $400 each. A physical inventory finds only 30 of
these programs on hand at December 31. (For this part, return to the original information and ignore what you did in part a.)
1. Prepare the journal entry to record the shrinkage loss assuming that Software City uses the FIFO flow assumption.
2. Prepare the journal entry to record the shrinkage loss assuming that Software City uses the LIFO flow assumption.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education