Financial & Managerial Accounting 17th Edition by Jan Williams ,Susan Haka,Mark Bettner,Joseph Carcello

تمرين 49

Accrual Accounting, Cash Flow, and Fair Value
Computer Resources Inc. is a computer retailer. Computer Resources began operations in December of the current year and engaged in the following transactions during that month. Computer Resources uses a perpetual inventory system.
Instructions
a. Compute the gross profit on Computer Resources's transactions during December.
b. Compute the gross profit on Computer Resources's transactions during December if a cash- basis accounting system was used.
c. Explain the difference between the results in a and b.
d. Assume that the fair value of Computer Resources's inventory at December 31 is $375,000. A potential lender asks Computer Resources to prepare a fair-value-based balance sheet. Prepare the journal entry to reflect inventory at fair value. Comment on how a retailer might determine fair value for inventory items. [Hint: Increase the Inventory account by the difference between fair value and book value with the offset to an account titled Revaluation of Inventory to Market Value.]