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

question 133

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: $\begin{array} { | l | l | l | } \hline & \text { Year 2 } & \text { Year 3 } \\\hline \text { Cost } & \$ 400 & \$ 600 \\\hline \text { Market } & 340 & 640 \\\hline\end{array}$
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.
For both methods, use the cost of goods sold account when recording ending inventory (periodic system).

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Definitions:

Self-monitoring

The process of paying attention to one's own behavior and using these observations to shape the way one behaves.

Self-report Measures

Assessment tools where individuals provide information about themselves, often used in psychological research and clinical diagnostics.

Conditioning Principles

Principles underlying the process by which behavioral responses become associated with specific stimuli through classical or operant conditioning.

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