11) The historical cost of Jahn Company's ending inventory was less than the current replacement cost. Following U.S. GAAP, which journal entry is required?
A) Debit Cost of Goods Sold and credit Sales
B) Debit Inventory and credit Cost of Goods Sold
C) Debit Cost of Goods Sold and credit Inventory
D) No journal entry is needed.
12) The Council of the Blind Store has ending inventory with a historical cost of $630,000. Assume the store uses the perpetual inventory system. The current replacement cost of the inventory is $608,000. The net realizable value is $650,000. Before any adjustments at the end of the period, the cost of goods sold account has a balance of $900,000. What journal entry is required under U.S. GAAP?
A) debit Cost of Goods Sold for $20,000 and credit Inventory for $20,000
B) debit Inventory for $20,000 and credit Cost of Goods Sold for $20,000
C) debit Cost of Goods Sold for $22,000 and credit Inventory for $22,000
D) debit Inventory for $22,000 and credit Cost of Goods Sold for $22,000
13) The Postotnik Construction Company has ending inventory with a historical cost of $630,000. Assume the company uses the perpetual inventory system. The current replacement cost of the inventory is $608,000. The net realizable value is $650,000. Before any adjustments at the end of the period, the cost of goods sold account has a balance of $900,000. What journal entry is required under IFRS?
A) No journal entry is required.
B) debit Cost of Goods Sold $20,000 and credit Inventory $20,000
C) debit Inventory $20,000 and credit Cost of Goods Sold $20,000
D) debit Cost of Goods Sold $22,000 and credit Inventory $22,000
14) The lower-of-cost-or-market rule for inventory is based on the accounting principle(s) of:
A) relevance
B) representational faithfulness
C) disclosure
D) A and B
15) It is the end of the year and Katerinos Company is applying the lower-of-cost-or-market (LCM) rule to inventory. The company uses the perpetual inventory system. The company has obtained the following information before any year-end adjustments:
Cost of Goods Sold
|
$500,000
|
Ending Inventory(Historical Cost)
|
$120,000
|
Ending Inventory(Current Replacement Cost)
|
$105,000
|
Ending Inventory(Net Realizable Value)
|
$115,000
|
Required:
1.Following U.S. GAAP, prepare the required journal entry at year-end.
2.Following IFRS, prepare the required journal entry at year-end.