Problem 5-20B: Allocating Product Costs Between Cost of Goods Sold and Ending Inventory:

Accounting for Inventories

Problem 5-20B: Allocating Product Costs Between Cost of Goods Sold and Ending Inventory: Intermittent Purchases and Sales of Merchandise

Donovan, Inc. had the following sales and purchase transactions during Year 2. Beginning inventory consisted of 120 items at $80 each. Donovan uses the FIFO cost flow assumption and keeps perpetual inventory records.

Required
a. Record the inventory transactions in general journal format.
b. Calculate the gross margin Donovan would report on the Year 2 income statement.
c. Determine the ending inventory balance Donovan would report on the December 31, Year 2, balance sheet.

Problem 5-21B: Inventory Valuation Based on the Lower-of-Cost-or-Market Rule

At the end of the year, Ronaldo Jewelers had the following items in inventory:

Required
a. Determine the amount of ending inventory using the lower-of-cost-or-market rule applied to each individual inventory item.
b. Provide the general journal entry necessary to write down the inventory based on Requirement a. Assume that Ronaldo Jewelers uses the perpetual inventory system.
c. Determine the amount of ending inventory, assuming that the lower-of-cost-or-market rule is applied to the inventory in aggregate.
d. Provide the general journal entry necessary to write down the inventory based on Requirement c. Assume that Ronaldo Jewelers uses the perpetual inventory system.