Toyland Town Was Counting on Wireless Wendy's Being the Hot

question 15

Essay

Toyland Town was counting on Wireless Wendy's being the hot new toy for the 2013 Christmas season.They made the following purchases and sales related to the toy: $\begin{array}{l}&\text { Units }\\&\text { Purchased}&\text { Unit Cost}&\text { Total Costs}&\text { Units Sold }\\\text { Opening Inventory: }\\\text { Purchases: }\\\text { August } 15 & 4,000 & \$ 6.00 & \$ 24,000 \\\text { September } 30 & 12,000 & \$ 7.00 & \$ 84,000 \\\text { November } 10 & 15,000 & \$ 7.50 & \$ 112,500\end{array}$ Sales
$\begin{array}{lr}\text { October } & 6,000 \text { units } \\\text { November } & 10,500 \text { units } \\\text { December } & 1.500 \text { units }\end{array}$ Unfortunately, in December there was a story in the newspaper about quality problems with the doll and low customer satisfaction.The manufacturer offered to sell Toyland the rest of their inventory at the original price of $6.00 per unit.The company uses a periodic inventory system.
Required:
A) If Toyland Town uses FIFO and the lower of cost or market, where market is defined as replacement cost, what would be the value of the Wireless Wendy inventory on December 31, 2013?
B) Based on your answer in part A) what costs related to Wireless Wendy would be on the 2013 income statement?
C) Do you have any other concerns about Toyland's inventory valuation at year-end?

• A) If Toyland Town uses FIFO and the lower of cost or market, where market is defined as replacement cost, what would be the value of the Wireless Wendy inventory on December 31, 2013?
• B) Based on your answer in part A) what costs related to Wireless Wendy would be on the 2013 income statement?
• C) Do you have any other concerns about Toyland's inventory valuation at year-end?

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Definitions:

Private Sector Unionization

The process or state of organizing workers into labor unions within privately owned and operated companies, as opposed to those in the public sector.

Conspiracy Doctrine

A legal theory used historically to treat labour unions as illegal conspiracies, limiting their ability to strike or organize until legal reforms provided more protection.

Antitrust Laws

Legislation intended to promote competition and prevent monopolies by regulating the conduct and organization of business corporations.

Employment-At-Will Doctrine

A legal principle that allows an employer to terminate an employee at any time for any reason, except an illegal one, and without warning, as long as the reason is not illegal.