P6-34A Applying the lower-of-cost-or-market rule to inventories [5 min]
Richmond Sporting Goods, which uses the FIFO method, has the following account
balances at August 31, 2012, prior to releasing the financial statements for the year:
Inventory
bal 14,500
Cost of goods sold
bal 67,000
Sales revenue
bal 117,000
Richmond has determined that the replacement cost (current market value) of the
August 31, 2012, ending inventory is $13,500.
Requirements
1. Prepare any adjusting journal entry required from the information given.
2. What value would Richmond report on the balance sheet at August 31, 2012,
for inventory?
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