PROBLEM 1

Journal entry for asset disposal

Extract from balance sheets at 30 June:

Additional information:
i Depreciation expense for the year is $130000.

ii Cosh proceeds for disposal of equipment during the year amounted to $110000, resulting in o loss on sale of $20000.

• Prepare the journal entry for the disposel of equipment.

PROBLEM 2
FIFO, UFO, lower of cost and net realisable value

Dizzy Lizzy, on entrepreneurial fortune teller, also sells tarot cords as a profitable sideline to her highly successful telephone clairvoyant service. The fciowing information relates to transactions concerning inventory for the year 1 January 2016 to 31 December 2016.

1. Assuming bat o perpetual system of inventory flow is used, calculate the COGS and closing inventory for:
a FIFO
b LIFO.

2. You estimate that in the current market the net realisable value of tarot cords is $5 per unit. Do you need to make any adjustments to either of your calculations obove to apply the lower of cost and net realisable value rule? If so, calculate the adjustment.

Case:-
Inventory write-down

Treasury Wine faces class action over US disclosure

Treasury Wine Estates, the worlds largest pyre-play winemaker, shocked markets and investors in July when it admitted an oversupply of poor and unwanted wine in the United States would trigger a $160 million write-down and include a $35 million charge to destroy past-its-date wine stocks.

The profit warning and write-off saw Treasury Wine Estates shares plunge more than 12 per cent and later led to the ejection of its chief executive, David Deane.

1. What would be the journal entry For the write-downs?

2. Why would a write-down in inventory lead to a decline in share price?