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Chapter 6: Q35PGB_1 (page 371)

Some of L and K Electronics鈥檚 merchandise is gathering dust. It is now December 31, 2018, and the current replacement cost of the ending merchandise inventory is\(32,000 below the business鈥檚 cost of the goods, which was \)98,000. Before any adjustmentsat the end of the period, the company鈥檚 Cost of Goods Sold account has a balanceof $410,000.

Requirements

1. Journalize any required entries.

Short Answer

Expert verified

The cost of goods sold would be debited, and inventory would be credited by the reduced amount,which is $66,000.

Step by step solution

01

Reduction in inventory value

Based on the lower of cost or net realizable value, the inventory has been reduced by the following amount -Reductionininventoryvalue=Historicalcost-Netrealizablevalue=$98,000-$32,000=$66,000

02

Journal Entry

The reduced value of inventory would be treated as normal loss and would be adjusted in the cost of goods sold. The journal entry would be as follows 鈥�

Date

Description

Debit

Credit

Dec 31, 2018

Cost of goods sold

$66,000

Merchandise Inventory

$66,000

Being ending inventory adjusted for lower replacement cost

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Most popular questions from this chapter

Right Now Electronic Center began October with 100 units of merchandise inventory that cost \(70 each. During October, the store made the following purchases:

Oct. 3 35 units @ \) 82 each

12 45 units @ \( 84 each

18 75 units @ \) 90 each

Right Now uses the periodic inventory system, and the physical count at October 31indicates that 130 units of merchandise inventory are on hand.

Requirements

1. Determine the ending merchandise inventory and cost of goods sold amountsfor the October financial statements using the FIFO, LIFO, and weighted-averageinventory costing methods.

How is inventory turnover calculated, and what does it measure?

Steel It began January with 55 units of iron inventory that cost \(35 each. During January, the company completed the following inventory transactions:

Units Unit Cost Unit Sales Price

Jan. 3 Sale 45 \) 83

8 Purchase 75 $ 52

21 Sale 70 85

30 Purchase 10 55

Requirements

5. Compute gross profit for January using FIFO, LIFO, and weighted-average inventorycosting methods.

Question:Boston Cycles started October with 12 bicycles that cost \(42 each. On October 16, Boston bought 40 bicycles at \)68 each. On October 31, Boston sold 34 bicycles for$100 each.

Preparing a perpetual inventory record and journal entries鈥� Weighted-average

Requirements

2. Journalize the October 16 purchase of merchandise inventory on the account and theOctober 31 sale of merchandise inventory on the account.

Question:Refer to Short Exercises S6-4 through S6-6. After completing those exercises, answer the following questions:

Requirements

2. Which inventory costing method produced the highest cost of goods sold?
See all solutions

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