Lower-Of-Cost-Or-Market Elite Systems Sells a Single Product.At December 31,the Company's Perpetual

question 20

Essay

Lower-of-cost-or-market
Elite Systems sells a single product.At December 31,the company's perpetual inventory records indicate 2,500 units on hand with a total cost (FIFO basis)of $155,000.The replacement cost of this product at this date is $35 per unit.
Prepare journal entries to record (a)the write-down of the inventory to the lower-of-cost-or-market value at December 31,and (b)the cash sale of 100 units on January 4 at a retail price of $50 per unit. (a)Dec.31
(b)Jan.4

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Definitions:

ROE

Return on Equity, a measure of a corporation's profitability by calculating how much profit a company generates with the money shareholders have invested.

Real Income

The purchasing power of an individual's or household's income, accounting for inflation.

Depreciation

An accounting method of allocating the cost of a tangible asset over its useful life.

Interest Expense

The cost incurred by an entity for borrowed funds; interest expense is often deductible for the borrower for tax purposes.