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  3. at 12/31/20, the end of cullumber company's first

At 12/31/20, the end of Cullumber Company's first year of business, inventory was $6,200 and...

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Accounting

At 12/31/20, the end of Cullumber Company's first year of business, inventory was $6,200 and $5,500 at cost and at market, respectively. Following is data relative to the 12/31/21 inventory of Jenner:

Item Original Cost Per Unit Replacement Cost
A $0.70 $0.35
B 0.45 0.40
C 0.80 0.85
D 0.75 0.65
E 0.85 0.80

Selling price is $1.00/unit for all items. Disposal costs amount to 10% of selling price and a "normal" profit is 20% of selling price. There are 1,500 units of each item in the 12/31/21 inventory.

a.Prepare the entry at 12/31/20 necessary to implement the lower-of-cost-or-market procedure assuming Cullumber uses a contra account for its balance sheet.

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