Select your language

Suggested languages for you:
Log In Start studying!
Answers without the blur. Just sign up for free and you're in → Illustration

Q35PGB_1

Expert-verified
Horngren'S Financial And Managerial Accounting
Found in: Page 371

Short Answer

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.

Requirements

1. 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

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

Most popular questions for Business-studies Textbooks

Icon

Want to see more solutions like these?

Sign up for free to discover our expert answers
Get Started - It’s free

Recommended explanations on Business-studies Textbooks

94% of StudySmarter users get better grades.

Sign up for free
94% of StudySmarter users get better grades.