Question

Debbie’s Garden Supplies uses a perpetual inventory system. Debbie’s Garden Supplies has these account balances at October 31, 2014, prior to making the year-end adjustments:


A year ago, the replacement cost of ending inventory was $32,500, which exceeded the cost of $31,000. Debbie’s Garden Supplies has determined that the replacement cost of the October 31, 2014, ending inventory is $31,500.

Requirement
1. Prepare Debbie’s Garden Supplies’ 2014 income statement through gross profit to show how the company would apply the lower-of-cost-or-market rule to itsinventories.


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  • CreatedJuly 25, 2014
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