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### Horngren'S Financial And Managerial Accounting

Book edition 6th
Author(s) Tracie L. Miller-Nobles, Brenda L. Mattison
Pages 992 pages
ISBN 9780134486833

# Some of L and K Electronics’s 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’s cost of the goods, which was$98,000. Before any adjustmentsat the end of the period, the company’s Cost of Goods Sold account has a balanceof $410,000.Requirements1. Journalize any required entries. The cost of goods sold would be debited, and inventory would be credited by the reduced amount,which is$66,000.

See the step by step solution

## Step1: Reduction in inventory value

Based on the lower of cost or net realizable value, the inventory has been reduced by the following amount -

## Step 2: 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 –

 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