How is merchandising inventory valued when using thelower-of-cost-or-market rule? a)
ABC Company paid $3,000 for its merchandise inventory. At theend of the accounting period, the merchandise inventory can now bereplaced for $2,700 and this decline appears to be permanent. Writethe journal entry to write down the inventory to LCM:
What are the effects of merchandise inventory errors on thefinancial statements? Fill in the blanks below with “understated”or “overstated”:
a) If the ending merchandise inventory is overstated, then costof goods sold is _____________, and the net income is_______________.
b) If the ending merchandise inventory is understated, then costof goods sold is ____________, and the net income is_______________.
How do we use inventory turnover and days’ sales in inventory toevaluate business performance?
a) What are the formulas for inventory turnover and days’ salesin inventory?
b) Calculate the inventory turnover and days’ sales in inventorybased on the information below (show work):
Cost of goods sold $11,000
Beginning merchandise inventory 4,000
Ending merchandise inventory 3,000
