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Explain what is meant by the Internal Revenue Service conformity rule with respect to the inventory method choice.
The Cloud Company employs a perpetual inventory system and the McKenzie Corporation uses a periodic system. Describe the differences between the two systems in accounting for the following events: (1) purchase of merchandise, (2) sale of merchandise, (3) return of merchandise to supplier, and (4) payment of freight charge on merchandise purchased. Indicate which accounts would be debited and credited for each event.
The inventory of Royal Decking consisted of 5 products. Information about the Dec 31, 2018 inventory is as follow:
Product Cost Replacement Cost Selling Cost
A $55 $50 75
B 95 85 115
C 55 70 95
D 115 85 145
E 35 43 45
Selling cost consist of a sales commission equal to 10% of selling price and shipping cost equal to 5% of the cost. The normal gross profit percentage is 30% of selling price.
Required: What unit should Royal Decking use for each of its products when applying the lower cost % market (LCM) rules to unit of ending inventory. They looking for NRV(Ceiling) and NRV-NP, Market and per unit inventory value
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