Applying the lower of cost or market rule to inventories
Rocky Bayou Golf Clubs, which uses the FIFO method, has the following account balances at July 31, 2012, prior to releasing the financial statements for the year:
|
Inventory |
Cost of goods sold |
Sales revenue |
|||
|
Bal |
13,500 |
Bal |
68,000 |
Bal |
119,000 |
Rocky Bayou has determined that the replacement cost (current market value) of the July 31, 2012, ending inventory is $13,000.
Requirements
1. Prepare any adjusting journal entry required from the information given.
2. What value would Rocky Bayou report on the balance sheet at July 31, 2012, for inventory?