The Key West Group Uses the Lower of Cost and Net

question 98

Essay

The Key West Group uses the lower of cost and net realizable value rule to value its kayak inventory. The Kayaks in inventory were purchased on January 1, 2012 for $12,000. At year end December 31, 2012 the net realizable value of Key West's inventory dropped to $9,000. At the end of 2013 due to a shortage of Kayaks this inventory increased in value to $15,000.
Required:
Prepare the required journal entries (if any) required at the 2012 and 2013 year end.

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Definitions:

Prolonged Unemployment

Prolonged unemployment refers to an extended period during which an individual remains jobless despite actively seeking employment, often leading to significant economic and psychological consequences.

Labor Skills

The abilities and expertise that workers possess, which determine their employability and efficiency in performing specific tasks.

Inflation Rate

The rise in the cost of goods and services across an economy over a specific period, expressed as a percentage.

Potential GDP

An estimate of the maximum level of economic activity that an economy can sustain over the long term without increasing inflation.