What is the journal entry for the following question? ABC uses a periodic invent
ID: 2519295 • Letter: W
Question
What is the journal entry for the following question?
ABC uses a periodic inventory system, and the ending inventory for each year is determined by taking a complete physical inventory at year-end. A physical count was taken on December 31, 2016, and the inventory on-hand at that time totaled $70,000, which reflects historical cost. Record the adjusting entry for properly recognizing 2016 Cost of Goods Sold. Hint: This was the first year of operations, so beginning inventory balance is zero. Additionally, ABC adheres to GAAP by recording ending inventory at the lower of cost and net realizable value at a total inventory level. A review of inventory data further indicated that the current retail sales value of the ending inventory is $60,000 and estimated costs of completion and shipping is 10% of retail. Be sure to make an additional adjustment, if necessary, to properly value ending inventory using the Loss and Allowance methodology. For Income Statement presentation purposes, be sure to use the Loss Method for accounting for adjustments of inventory to market value.Explanation / Answer
1 Mechandise Inventory Purchase amid the year $2,47,000
Less: Ending Inventory (according to physical verification) (55,000)
Cost of merchandise sold 1,92,000
Modifying diary section
Charge $ Crredit $
Cost of Goods sold 1,92,000
Inventory 55,000
Stock purchases 2,47,000
Deals Revenue xxxx
Cost of Goods sold 1,92,000
To Gross Income ($ xxxx-$ 192,000) xxxx
2 Market Value of inventory 50,000
Less: Cost of fruition and transportation ($ 50,000 x 15%) (7,500)
Net Realizable Value of inventory 42,500
Cost of Inventory 55,000
Stock cost discounted ($ 55,000 - $ 425,000) 12,500
Note: Here it is expected that the diminishment in thevalue of stock, $ 12,500 being charged to cost of merchandise sold bypassig the accompanying change passage
Altering diary section
Charge $ Crredit $
Cost of Goods sold ($ 192,000 + $ 12,500) 2,04,500
Inventory 42,500
Stock purchases 2,47,000
Deals Revenue xxxx
Cost of Goods sold ($ 192,000 + $ 12,500) 2,04,500
To Gross Income ($ xxxx-$ 204,500) xxxx
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