What accounting action should freshwater take

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Freshwater Trade Mart has recently had lackluster sales. The rate of inventory turnover has dropped and the merchandise is gathering dust. At the same time, competition has forced Freshwater's suppliers to lower the prices that Freshwater will pay when it replaces its inventory. it is now December 31, 2012 and the current replacement cost of Fresh water is $80,000 below what Freshwater paid for the goods, which was $230,000. Before any adjustments at the end of the period, the Cost of Goods sold account was $790,000.
Requirements:
a. What accounting action should Freshwater take in this situation. Freshwater should apply the (a). average-cost method (b).first in, first out method (c). last in, first out method (d). lower-of-cost-or market rule. Current replacement cost of ending inventory is (a) equal to (b).less than (c).more than. Must write the inventory (a) down. (b). up.
b. Give the journal required.
c. At what amount should Freshwater report inventory on the balance sheet?
d. At what amount should the company report Cost of Goods Sold on the income statement?

Reference no: EM13528011

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