Question

AquariumAquarium

Trade Mart has recently had lackluster sales. The rate of inventory turnover has? dropped, and the merchandise is gathering dust. At the same? time, competition has forced

AquariumAquarium?'s

suppliers to lower the prices that

AquariumAquarium

will pay when it replaces its inventory. It is now December? 31,

20162016?,

and the current replacement cost of

AquariumAquarium?'s

ending inventory is

$ 75 comma 000$75,000

below what

AquariumAquarium

actually paid for the? goods, which was

$ 200 comma 000$200,000.

Before any adjustments at the end of the? period, the Cost of Goods Sold account has a balance of

$ 820 comma 000$820,000.

Requirements

a.	What accounting action should AquariumAquarium take in this? situation?
b.	Give any journal entry required.
c.	At what amount should AquariumAquarium report Inventory on the balance? sheet?
d.	At what amount should the company report Cost of Goods Sold on the income? statement?
e.	Discuss the accounting principle or concept that is most relevant to this situation.

Requirement a. What accounting action should

AquariumAquarium

take in this? situation?

Answer 1