P9-3 (Entries for lower-of-Cost-or-Market-Direct and Allowance) Malone Company determined its ending inventory at cost and at lower-of-Cost-or-Marketat December 31, 2009, December 31,201 and December 31,2011 as shown below

Date / Cost / Lower-of Cost-or-Market
12/31/2009 / $650,000.00 / $650,000.00
12/31/2010 / $780,000.00 / $712,000.00
12/31/2011 / $905,000.00 / $830,000.00

A)  Prepare the Journal Entries required at December 31 2010 and at December 31 2011, assuming that a perpetual inventory system and the direct method of adjusting to lower-of-cost-or-market is used

B)  Prepare the Journal Entries required at December 31 2010 and at December 31 2011, assuming that a perpetual inventory is recorded at cost and reduced to lower-of-cost-or-market through the use of an allowance account (indirect method)

P9-5 (Gross Profit Method) on April 15, 2011 fire damaged the office and warehouse of Stanislaw Corporation. The only accounting record saved was the general ledger, from which the trial balance below was prepared

Stanislaw Corporation
Trial Balance
March 31, 2011
CASH / $20,000.00
ACCOUNTS RECEIVABLE / $40,000.00
INVENTORY, DECEMBER 31, 2010 / $75,000.00
LAND / $35,000.00
BUILDING AND EQUIPMENT / $110,000.00
ACCUMULATED DEPRECIATION / $41,300.00
OTHER ASSETS / $3,600.00
ACCOUNTS PAYABLE / $23,700.00
OTHER EXPENSE ACCOUNTS / $10,200.00
CAPITAL STOCK / $100,000.00
RETAINED EARNINGS / $52,000.00
SALES / $135,000.00
PURCHASES / $52,000.00
OTHER EXPENSES / $26,600.00
TOTAL / $362,200.00 / $362,200.00

The following data and information have been gathered

1)  The fiscal year of the corporation ends on December 3.

2)  An examination of the April bank statement and canceled checks reveled that checks written during the period April 1-15 totaled $13000: $5700 paid to accounts payable as of March 31, $3400 for April merchandise shipments and $3900 paid for other expenses. Deposits during the same period amounted to $ 12950, which consisted of receiptsin account from customers with the exception of a $950 refund from a vendor for merchandise returned in April.

3)  Correspondence with suppliers revealed unrecorded obligationsat April 15 of $15600 for April merchandise shipments, including $2300 for shipments in transit (f.o.b. shipping point) on that date

4)  Customers acknowledged indebtedness of $46000 at April 15, 2011. It was also estimated that customers owned another $8000 that will never be acknowledged or recovered. Of the acknowledged indebtedness $600 will probably be uncollectible.

5)  The companies insuring the inventory agreed that the corporation’s fire-loss claim should be based on the assumption that the overall gross profit ratio for the past 2 years was in effect during the current year. the corporations audited financial statements disclosed this information:

Year Ended
December 31
2010 / 2009
Net sales / $530,000.00 / $390,000.00
Net purchases / $280,000.00 / $235,000.00
Beging Inventory / $50,000.00 / $66,000.00
Ending inventory / $75,000.00 / $50,000.00

6)  Inventory with a cost of $7000 was salvaged and sold for $3500. The balance of the inventory was a total loss

Prepare a schedule computing the amount of inventory fire loss. The supporting schedule of the computation of the gross profit should be in good form.