Financial accounting 16th Edition by Jan Williams,Susan Haka,Mark Bettner ,Joseph Carcello

تمرين 40

Mary's Nursery uses a perpetual inventory system.t December 31, the perpetual inventory records indicate the following quantities of a particular blue spruce tree:

A year-end physical inventory, however, shows only 310 of these trees on hand.
In its financial statements, Mary's Nursery values its inventories at the lower-of-cost- or-market.t year-end, the per-unit replacement cost of this tree is $40.Use $3,500 as the "level of materiality" in deciding whether to debit losses to Cost of Goods Sold or to a separate loss account.)
Instructions
Prepare the journal entries required to adjust the inventory records at year-end, assuming that:
a.ary's Nursery uses:
1.verage cost.
2.ast-in, first-out.
b.ary's Nursery uses the first-in, first-out method.owever, the replacement cost of the trees at year-end is $20 apiece, rather than the $40 stated originally.Make separate journal entries to record (1) the shrinkage losses and (2) the restatement of the inventory at a market value lower than cost.ecord the shrinkage losses first.]
c.ssume that the company had been experiencing monthly inventory shrinkage of 30 to 60 trees for several months.n response, management placed several hidden security cameras throughout the premises.ithin days, an employee was caught on film loading potted trees into his pickup truck.he employee's attorney asked that the case be dropped because the company had "unethically used a hidden camera to entrap his client." Do you agree with the attorney Defend your answer.