Use the following information for questions 1 & 2 RAC Corp sells refrigerators a
ID: 2552979 • Letter: U
Question
Use the following information for questions 1 & 2 RAC Corp sells refrigerators and dishwashers. Information related to the inventory of RAC Corp is provided below.
Use the following information for questions 1 & 2 RAC Corp sells refrigerators and dishwashers. Information related to the inventory of RAC Corp is provided below.
Cost - Replacement Cost - Net Realizable Value - Net Realizable Value Less a Normal Profit Margin
Refrigerator Models
Elite 80,000 - 70,000 - 80,000 - 60,000
Standard 100,000 - 110,000 - 100,000 - 70,000
Economy 90,000 - 75,000 - 90,000 - 80,000
Dishwasher Models
Pro 150,000 - 140,000 - 170,000 - 155,000
Residential 95,000 - 85,000 - 92,000 - 80,000
1. Calculate the final inventory value for RAC Corp based on individual inventory items (5 points):
2. Record the journal entry to write-down inventory assuming the allowance method is used (4 points).
Explanation / Answer
Statement Showing Final Inventory for RAC Corp Motor- For Refregirator Journal Entry Refrigerator Models Cost Replacement value NRV NRV - Normal profit margin Lower of Cost or market value Choice Account Title & Explanantion Debit Credit Elite 80000 70000 80000 60000 70000 (Replacement value) Loss - Reducing inventory to LCM 20000 Standard 100000 110000 100000 70000 100000 (cost or repalcement value limited to NRV) Allowance -To Reduce Inventory to LCM 20000 Economy 90000 75000 90000 80000 80000 (replacement value, limited to $80,000) To Record Loss due to Inventory Valutaion on Refregerator 270000 250000 Loss - Reducing inventory to LCM 10000 Statement Showing Final Inventory for RAC Corp Motor for Diswasher Allowance -To Reduce Inventory to LCM 10000 Dishwasher model: Cost Replacement value NRV NRV - Normal profit margin Lower of Cost or market value Choice To Record Loss due to Inventory Valutaion on Diswasher Pro 150000 140000 170000 155000 150000 (Cost, as replacement value is limited to $155,000) Residential 95000 85000 92000 80000 85000 (Replacement value) 245000 235000