At the End of the First Year of a Firm's

question 165

Essay

At the end of the first year of a firm's operations,the total inventory at cost was $200 and the market value (for purposes of Lower of Cost or NRV valuation) was $220.The corresponding values at the end of years 2 and 3 are as follows: $$\begin{array} { l l l } & \text { Year 2 } & \text { Year 3 } \\\hline \text { Cost } & \$ 400 & \$ 600 \\\hline \text { Market } & 340 & 640\end{array}$$ Required: provide the adjusting entries at the end of years 2 and 3 to record inventory at Lower of Cost or NRV using:
(a) the direct reduction method,and
(b) the inventory allowance method.

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Definitions:

Pituitary Gland

A small endocrine gland at the base of the brain that controls various bodily functions by producing hormones.

Hormone Secretions

The process by which hormones are released by glands into the bloodstream.

Dm

Often shorthand for diabetes mellitus, a chronic condition characterized by high levels of sugar in the blood due to insulin production or function issues.

Correct Meaning

The accurate interpretation or definition of a word, phrase, or symbol.