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Chapter 9: Question E9-30 (page 482)

John Olerud Ltd., a local retailing concern in the Bronx, New York, has decided to change from the conventional retail inventory method to the LIFO retail method starting on January 1, 2018. The company recomputed its ending inventory for 2017 in accordance with the procedures necessary to switch to LIFO retail. The inventory computed was \(212,600. Instructions Assuming that John Olerud Ltd.鈥檚 ending inventory for 2017 under the conventional retail inventory method was \)205,000, prepare the appropriate journal entry on January 1, 2018.

Short Answer

Expert verified

In the journal entry, inventory (beginning) will be debited, and adjustment to record inventory at cost will be credited by $7,600, respectively.

Step by step solution

01

Calculation of adjustment

The adjustment amount is calculated as follows:

AdjustmentAmount=InventoryasPerLIFORetail-InventoryasPerConventionalRetail=$212,600-$205,000=$7,600

02

Journal entry

The following journal entry will be recorded:

Date

Description

Debit

Credit

January 1, 2018

Inventory (beginning)

$7,600

Adjustment to record inventory at cost

$7,600

(Being adjusted to record inventory at cost)

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Most popular questions from this chapter

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Question:What factors might call for inventory valuation at sales prices (net realizable value or market price)?

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Presented below is information related to Rembrandt Inc.鈥檚 inventory, assuming Rembrandt uses lower-of-LIFO cost-or-market. (per unit) Skis Boots Parkas Historical cost \(190.00 \)106.00 $53.00 Selling price 212.00 145.00 73.75 Cost to distribute 19.00 8.00 2.50 Current replacement cost 203.00 105.00 51.00 Normal profit margin 32.00 29.00 21.25 Determine the following: (a) the two limits to market value (i.e., the ceiling and the floor) that should be used in the lower-of cost-or-market computation for skis, (b) the cost amount that should be used in the lower-of-cost-or-market comparison of boots, and (c) the market amount that should be used to value parkas on the basis of the lower-of-cost-or-market.
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