Hello, If a bookstore have 28 Accounting textbooks in stock which originally cos

Question

Hello, If a bookstore have 28 Accounting textbooks in stock which originally cost $110 each. Then McGraw Hill releases a brand-new edition of the accounting textbook; as such, demand for the accounting textbooks purchased during May has declined. To compensate, the bookstore reduces the price of each of its May accounting books to $95, as this is all customers are willing to pay. How do we record this entry? Another entry is ... After performing the month-end inventory count, the bookstore realizes two (2) of the accounting textbooks have been stolen. How to make the journal entry for this one?  

Explanation / Answer

1. How do you record the entry for reducing the price?

Answer: We are in the business of selling books. So, this will be our inventory. When we are decreasing the price of the inventory, it is called mark – down of inventory and is an expense to the book store. So journal entry will be

Mark – Down of inventory A/C                          420*

            Inventory A/C                                                  420*

Eventually these Mark Down Inventory will be transferred to Profit or Loss Statement or Income Statement.

* 420 = 28 * (110-95)

2. How to make the journal entry for stolen books?

Answer: Journal entry for recording lost books will be as follows

Loss by Theft A/C                                             190*

            Inventory A/C                                                  190*

Eventually this Loss by theft account will also be transferred to Profit or Loss Statement or Income Statement.

* 190 = 2 * 95 (after mark down).

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