Hougton Company Follows U

question 112

Essay

Hougton Company follows U.S.GAAP and has the following inventory data available:
The company has 1,000 shirts of each style in stock at year end.The company uses the indirect method to record the lower-of-cost-or-market rule.
Required:
1.a.Determine the value of inventory reported on the balance sheet at year end if the lower-of-cost-or-market rule is applied to each inventory item.
b.Prepare the journal entry required at year end.
2.a.Determine the value of inventory reported on the balance sheet at year end if the lower-of-cost-or-market rule is applied to the shirts as a group of items.Use gender to group the items.
b.Prepare the journal entry required at year end.

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Definitions:

Target Return-on-investment Pricing

A pricing method aimed at achieving a specific return on investment by setting prices based on the required rate of return.

Automobile Manufacturer

A company engaged in the design, production, marketing, and selling of motor vehicles.

Book Publisher

A company or individual responsible for bringing a book to the public by handling its production, marketing, and distribution.

Customary Pricing

A pricing strategy where the price is based on what the market expects to pay, often influenced by tradition or standard practice.