question archive RoseTree Garden Supplies uses a perpetual inventory system
RoseTree Garden Supplies uses a perpetual inventory system
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RoseTree Garden Supplies uses a perpetual inventory system. RoseTree Garden Supplies has these account balances at August 31, 2014, prior to making the year-end adjustments:
Inventory Cost of Goods Sold Sales Revenue
Beg bal 30,000
End bal 34,000 Bal 118,000 Bal 251,000
A year ago, the current replacement cost of ending inventory
was $31,500, which exceeded the cost of $30,000. RoseTree Garden Supplies has determined that the replacement cost of the August 31, 2014, ending inventory is $32,000.
Requirement
1. Prepare RoseTree Garden Supplies€™ 2014 income statement through gross profit to show how the company would apply the lower-of-cost-or-market rule to itsinventories.
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Rose Tree Garden Supplies |
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Income Statement (partial) |
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Year Ended August31, 2014 |
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Sales revenue.......................................................................................................... |
$251,000 |
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Cost of goods sold [$118,000 + ($34,000 - $32,000)].......................................... |
120,000 |
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Gross profit............................................................................................................ |
$131,000 |
