Answered

At Westonci.ca, we connect you with the answers you need, thanks to our active and informed community. Get accurate and detailed answers to your questions from a dedicated community of experts on our Q&A platform. Our platform provides a seamless experience for finding reliable answers from a network of experienced professionals.

The following information applies to the questions displayed below] A local Chevrolet dealership carries the following types of vehicles
Inventory Items Quantity Cost per unit NRV per Unit
Vans 4 27000 25000
Trucks 7 18000 17000
2-door sedans 3 13000 15000
4-door sedans 5 17000 20000
Sports cars 1 37000 40000
SUVs 6 30000 28000
Because of recent increases in gasoline prices, the car dealership has noticed a reduced demand for its SUVs, vans, and trucks
A) Compute the total cost of the entire inventory.
B) Determine whether each inventory item would be reported at cost or net realizable value (NRV).
C) Prepare necessary journal entry to write down inventory from from close to net realize value.
D) The write-down of inventory from cost to net realizable value reduces total assets and increases total expenses, leading to lower net income and lower retained earnings. True OR False

Sagot :

anthougo

Answer:

Chevrolet Dealership

A) The total cost of the entire inventory is:

= $575,000

B) Each inventory would be reported at the LCNRV:

Inventory Items  Quantity  Reporting Cost/Value

Vans                        4              NRV

Trucks                     7              NRV

2-door sedans        3              Cost

4-door sedans        5              Cost

Sports cars              1              Cost

SUVs                       6              NRV

C) Journal Entry:

Debit Cost of goods sold $27,000

Credit Inventory $27,000

To write-down costs to net realizable values.

D) TRUE.

Explanation:

a) Data and Calculations:

Inventory Items  Quantity    Cost per unit      NRV per Unit      LCNRV

Vans                        4           27000 $108,000      25000        $100,000

Trucks                     7            18000   126,000       17000           119,000

2-door sedans        3           13000     39,000      15000            39,000

4-door sedans        5           17000     85,000     20000            85,000

Sports cars              1          37000      37,000     40000            37,000

SUVs                       6         30000    180,000     28000           168,000

Total Cost                                      $575,000                         $548,000

We appreciate your time on our site. Don't hesitate to return whenever you have more questions or need further clarification. We appreciate your time. Please come back anytime for the latest information and answers to your questions. Westonci.ca is committed to providing accurate answers. Come back soon for more trustworthy information.