Richmond Sporting Goods, which uses the FIFO method, has the following account b

Question

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 Cost of goods sold
Bal 14,500 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.



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?

Explanation / Answer

1. Prepare any adjusting journal entry from the information given May 31 2012 ======Cost of Goods sold =====Dr.=====500 ================Inventory=============Cr.=====500 To record the inventory lower of Cost or NRV 2. What value would Richmond report on the balance sheet at May 31, 2012, for inventory $ 12,500 3. According to the Lower of Cost or Net Realisable Value rule Richmond should report inventory on the May 31 balance sheet at replacement cost.

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