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

تمرين 44

Year-EndAdjustments;Shrinkage Losses

Sam's Lawn Mowers uses a perpetual inventory system.t December 31, the perpetual inventory records indicate the following quantities of a particular mower.

A year-end physical inventory, however, shows only 199 of these lawn mowers on hand.
In its financial statements, Sam's values its inventories at the lower-of-cost-or-market.t year end, the per-unit replacement cost of this particular model is $125.
Instructions
Prepare the journal entries required to adjust the inventory records at year-end assuming that:
a.am's uses:
1.verage cost.
2.ast-in, first-out.
b.am's uses the first-in, first-out method.owever, the replacement cost of the lawn mowers at year-end is $90 apiece, rather than the $125 stated originally.ake separate journal entries to
record (1) the shrinkage loss and (2) the restatement of the inventory at a market value lower than cost.ecord the shrinkage loss first.
c.ssume that the company had been experiencing monthly inventory shrinkage of one to four lawn mowers for several months.n response, management placed several hidden security cameras throughout the premises.ithin days, an employee was caught on film loading lawn mowers 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.