Telma Ltd. is a public company incorporated in Alberta and traded on the Toronto...

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Accounting

Telma Ltd. is a public company incorporated in Alberta and traded on the Toronto Stock Exchange. In December 20X6, Telma management decided that cost exceeded NRV for a significant portion of the inventory. Consequently, the company wrote the Class A inventory down from $350,000 to $150,000 and the Class B inventory down from $425,000 to $325,000.
In June 20X7, the value of Class B inventory rose to $365,000. Half of the Class B was sold for $190,000 in November of that year.
In March 20X8, the Class A inventory was sold in bulk for a price of €100,000. At the time of the sale, €1 = Cdn$1.70. The buyer paid Telma’s invoice one month later, when €1 = Cdn$1.62.

Required:
1. Prepare all entries, assuming that the direct write-down method is used for lower of cost or NRV.
2. Prepare all entries, assuming instead that the allowance method is used for lower of cost or NRV.

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Requirement 1 x Direct writedown December 20X6 Holding loss on inventory COS 300000 Inventory Class A 200000 Inventory Class B 100000 June 20X7 Inventory Class B 40000 Recovery of holding loss COS 40000 November 20X7 Accounts receivable See Answer

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In: AccountingTelma Ltd. is a public company incorporated in Alberta and traded on the Toronto Stock Exchange. In December 20X6, Telma management decided that cost exceeded NRVTelma Ltd. is a public company incorporated in Alberta and traded on the Toronto Stock Exchange. In December 20X6, Telma management decided that cost exceeded NRV for a significant portion of the inventory. Consequently, the company wrote the Class A inventory down from $350,000 to $150,000 and the Class B inventory down from $425,000 to $325,000.In June 20X7, the value of Class B inventory rose to $365,000. Half of the Class B was sold for $190,000 in November of that year.In March 20X8, the Class A inventory was sold in bulk for a price of €100,000. At the time of the sale, €1 = Cdn$1.70. The buyer paid Telma’s invoice one month later, when €1 = Cdn$1.62. Required:1. Prepare all entries, assuming that the direct write-down method is used for lower of cost or NRV.2. Prepare all entries, assuming instead that the allowance method is used for lower of cost or NRV.