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

Exercise 65

Accrual Accounting, Cash Flow ,and Fair Value
Computer Resources Inc.s a computer retailer.omputer Resources began operations in December of the current year and engaged in the following transactions during that month.omputer Resources uses a perpetual inventory system.
Dec. Purchased $100,000 of computer equipment, terms n/30.
Dec.2 Sold $100,000 of computer equipment, terms n/30.he cost of the equipment sold is $50,000.
Dec.6 Purchased $200,000 of computer equipment, terms n/30.
Instructions
a.ompute the gross profit on Computer Resources's transactions during December.
b.ompute the gross profit on Computer Resources's transactions during December 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 Computer Resources's inventory at December 31 is $375,000.A potential lender asks Computer Resources to prepare a fair-value-based balance sheet.repare the journal entry to reflect inventory at fair value.omment on how a retailer might determine fair value for inventor) 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.]