Management of Tarry Company reports the following inventory using LIFO and applies the lower of cost or marketrule.■Edgers: 1,440 units in inventory; cost is $22 each; replacement cost is $16 each; estimated sale price is $30 each;estimated distribution cost is $3 each; and normal profit is 10% of sale price.■Clippers: 960 units in inventory; cost is $50 each; replacement cost is $36 each; estimated sale price is $90 each;estimated distribution cost is $28 each; and normal profit is 20% of sale price.Requireda. Determine the inventory cost to report on the balance sheet assuming that the company applies the lower of cost ormarket rule to each inventory item.b. Prepare the journal entry to apply the lower of cost or market rule to inventory assuming that the company adjustsinventory directly and adjusts equity through cost of goods sold.a. Inventory valuation for edgers $Inventory valuation for clippersTotal inventory valuation$0b.Account NameTo apply the lower of cost or market rule to inventory.Dr.Cr.

Step 1: Calculate the market value for each type of inventory.For Edgers:Market value = Estimated…

Answered: Management of Tarry Company reports the…

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter13: Accounting For Merchandise Inventory

Section: Chapter Questions

Problem 7SPB: COST ALLOCATION AND LOWER-OF-COST-OR-MARKET Hall Companys beginning inventory and purchases during...

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