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

Exercise 61

Thompson Plumbing Inc.s a wholesaler of plumbing accessories.hompson Plumbing began operations in September of the current year and engaged in the following transactions during September and October of this year.hompson Plumbing uses a perpetual inventory system.

Instructions
a.ompute the gross profit on Thompson Plumbing's transactions during September and October.
b.ompute the gross profit on Thompson Plumbing's transactions during September and October if a cash-basis accounting system was used.
c.xplain the difference between the results in a and b.
d.ssume that the fair value of Thompson Plumbing's inventory at October 31 is $750,000. potential lender asks Thompson Plumbing to prepare a fair-value-based balance sheet.repare the journal entry to reflect inventory at fair value.omment on how a wholesaler 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.]