SOLUTION:

GREECE COMPANY

1. What amount should be reported as cost of goods sold?

SOLUTION:
Inventory -Jan. 1 – 3,000,000
Net purchases – 8,000,000
Goods available for sale = 11,000,000
Inventory -Dec. 31 – (4,000,000)
Cost of goods sold (before inventory write down) – 7,000,000
Loss on inventory write down – 100,000
Cost of goods sold (after inventory write down) – 7,100,000

JULIE COMPNAY

2. . loss on inventory write down (cost of goods sold).

SOLUTION:

COST NRV LCNRV

Product 1 800,000 550,000 550,000
Product 2 1,000,000 1,100,000 1,000,000
Product 3 700,000 950,000 700,000
Product 4 500,000 350,000 350,000
total 3,000,000 2,600,000

Total cost – 3,000,000

LCNRV – 2,600,000
Required allowance (inventory write down) – 400,000
Allowance before adjustment – (150,000)
Increase in allowance – 250,000

loss on inventory write down = 250,000

ATLIS COMPANY

3. Amount reported in cost of goods sold.

SOLUTION:
Sep. 30 (40,000 x 75) – 3,000,000
Dec. 31(10,000 x 80) – 800,000
FIFO cost – 3,800,000
Net realizable value (50,000 x 72) – 3,600,000
Inventory write down – 200,000
Inventory-Jan. 1 – 1,200,000
Purchases – 9,300,000
Purchase discount – (400,000)
Goods available for sale – 10,100,000
Inventory - December 31 at cost – (3,800,000)
Cost of goods sold before inventory write down – 6,300,000
Loss on inventory write down – 200,000
Cost of goods sold after inventory Write down – 6,500,000