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StormLrd StormLrd
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6 years ago
Roughrider Ltd. (Roughrider) uses the lower of cost and net realizable value rule to value its football equipment inventory. Roughrider defines market as net realizable value. Roughrider's inventory on January 31, 2014 had a cost of $1,200,000 and an NRV of $1,125,000.

Required:
a.   By how much should Roughrider's inventory be written down?
b.   Prepare the journal entry that Roughrider should prepare to record the write-down.
c.   What amount should be reported for inventory on Roughrider's January 31, 2014 balance sheet?
Textbook 
Cost Accounting: A Managerial Emphasis, Canadian Edition

Cost Accounting: A Managerial Emphasis, Canadian Edition


Edition: 7th
Authors:
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#1
6 years ago
a.   The inventory should be written down by $1,200,000 - $1,125,000 = $75,000.

b.   Dr. Cost of sales   75,000
      Cr. Inventory   75,000

c.   The inventory should be presented on the balance sheet at $1,125,000.
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