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Late in the year, Software City began carrying Wor...

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Late in the year, Software City began carrying WordCrafter, a new word processing software program. At December 31, Software City?s perpetual inventory records included the following cost layers in its inventory of WordCrafter programs: Purchase Date Quantity Unit Cost Total Cost Nov. 14 8 $ 400 $ 3,200 Dec. 12 20 310 6,200 Total available for sale at Dec. 31 28 $ 9,400 a. At December 31, Software City takes a physical inventory and finds that all 28 units of Word-Crafter are on hand. However, the current replacement cost (wholesale price) of this product is only $250 per unit. a-1 Prepare the entries to record this write-down of the inventory to the lower-of-cost-or-market at December 31. (Company policy is to charge LCM adjustments of less than $2,000 to Cost of Goods Sold and larger amounts to a separate loss account.) (Omit the "$" sign in your response.) General Journal Debit Credit 1. a-2 Prepare the entries to the cash sale of 15 WordCrafter programs on January 9, at a retail price of $350 each. Assume that Software City uses the FIFO flow assumption. (Omit the "$" sign in your response.) General Journal Debit Credit 2. b. Now assume that the current replacement cost of the WordCrafter programs is $405 each. A physical inventory finds only 25 of these programs on hand at December 31. (For this part, return to the original information and ignore what you did in part a.) b-1 Prepare the journal entry to record the shrinkage loss assuming that Software City uses the FIFO flow assumption. (Omit the "$" sign in your response.) General Journal Debit Credit 1. b-2 Prepare the journal entry to record the shrinkage loss assuming that Software City uses the LIFO flow assumption. (Omit the "$" sign in your response.) General Journal Debit Credit 2.

 

Paper#8385 | Written in 18-Jul-2015

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