Sandhill Corporation had the following items in inventory as at December 31, 2023: Unit Item No. Quantity Cost NRV A1 160 $3.25 $4.90 B4 140 2.65 2.05 C2 125 2.25 10.45 D3 95 8.25 8.05 Assume that Sandhill uses a perpetual inventory system, and that none of the inventory items can be grouped together for accounting purposes. (a1) Prepare the year-end adjusting entry required to adjust to the lower of cost or net realizable value on an item-by-item basis using the direct method. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry before credit entry.)

Sandhill Corporation had the following items in inventory as at December 31, 2023: Unit Item No. Quantity Cost NRV A1 160 $3.25 $4.90 B4 140 2.65 2.05 C2 125 2.25 10.45 D3 95 8.25 8.05 Assume that Sandhill uses a perpetual inventory system, and that none of the inventory items can be grouped together for accounting purposes. (a1) Prepare the year-end adjusting entry required to adjust to the lower of cost or net realizable value on an item-by-item basis using the direct method. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry before credit entry.)

Name: Sandhill Corporation had the following items in inventory as at Decem
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Description: Sandhill Corporation had the following items in inventory as at December 31, 2023:UnitItem No. QuantityCostNRVA1160$3.25$4.90B41402.652.05C21252.2510.45D3958.258.05Assume that Sandhill uses a perpetual inventory system, and that none of the inventor

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.

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Question

Sandhill Corporation had the following items in inventory as at December 31, 2023:
Unit
Item No. Quantity
Cost
NRV
A1
160
$3.25
$4.90
B4
140
2.65
2.05
C2
125
2.25
10.45
D3
95
8.25
8.05
Assume that Sandhill uses a perpetual inventory system, and that none of the inventory items can be grouped together for accounting
purposes.
(a1)
Prepare the year-end adjusting entry required to adjust to the lower of cost or net realizable value on an item-by-item basis using
the direct method. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is
required, select "No Entry" for the account titles and enter O for the amounts. List debit entry before credit entry.)

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Step 1: Introduce to valuation of inventory

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Step 2: Working for lower of cost per unit or NRV per unit

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Step 3: Working for lower of cost or NRV

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Step 4: Working for cost of inventory

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