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Late in the year, Software City began carrying WordCrafter, a new word processing software

Late in the year, Software City began carrying WordCrafter, a new word processing software

Late in the year, Software City began carrying WordCrafter, a new word processing software program. At December 31, Software City’s perpetual inventory records included the following cost layers in its inventory of WordCrafter programs:

Purchase Date Quantity Unit Cost Total Cost
Nov. 14 8 $ 400 $ 3,200
Dec. 12 20 310 6,200

Total available for sale at Dec. 31 28 $ 9,400

a.
At December 31, Software City takes a physical inventory and finds that all 28 units of Word-Crafter are on hand. However, the current replacement cost (wholesale price) of this product is only $250 per unit.

a-1
Prepare the entries to record this write-down of the inventory to the lower-of-cost-or-market at December 31. (Company policy is to charge LCM adjustments of less than $2,000 to Cost of Goods Sold and larger amounts to a separate loss account.) (Omit the "$" sign in your response.)

General Journal Debit Credit
1.
a-2
Prepare the entries to the cash sale of 15 WordCrafter programs on January 9, at a retail price of $350 each. Assume that Software City uses the FIFO flow assumption. (Omit the "$" sign in your response.)

General Journal Debit Credit
2.

b.
Now assume that the current replacement cost of the WordCrafter programs is $405 each. A physical inventory finds only 25 of these programs on hand at December 31. (For this part, return to the original information and ignore what you did in part a.)

b-1
Prepare the journal entry to record the shrinkage loss assuming that Software City uses the FIFO flow assumption. (Omit the "$" sign in your response.)

General Journal Debit Credit
1.

b-2
Prepare the journal entry to record the shrinkage loss assuming that Software City uses the LIFO flow assumption. (Omit the "$" sign in your response.)

General Journal Debit Credit

Roshan kumar 09-Nov-2017

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