E9-5 (LCNRV-Valuation Account) Presented below is information related to Knight
ID: 2591569 • Letter: E
Question
E9-5 (LCNRV-Valuation Account) Presented below is information related to Knight Enterprises. Jan. 31 $15,000 14,500 Feb. 28 $15,100 12,600 17,000 29,000 Mar. 31 Inventory at cost Inventory at LCNRV Purchases for the month Sales for the month Apr. 30 $17,000$14,000 13,300 26,500 15,600 24,000 35,000 40,000 Instructions From the information, prepare (as far as the data permit) monthly income statements in col form for February, March, and April. The inventory is to be shown in the statement at cost; the gain or loss due to market fluctuations is to be shown separately (using a valuation (a) umnar account). (b) Prepare the journal entry required to establish the valuation account at January 31 and entries to adjust it monthly thereafterExplanation / Answer
SOLUTION:
PART-1)
Particulars
February
March
April
Sales
$29,000
$35,000
$40,000
COGS
Beginning inventory
$15,000
$15,100
$17,000
Purchases
$17,000
$24,000
$26,500
Cost of goods available
$32,000
$39,100
$43,500
Ending Inventory
$15,100
$17,000
$14,000
Cost of goods sold
$16,900
$22,100
$29,500
COGS
$12,100
$12,900
$10,500
Gain / loss because of the market fluctuations of inventory
-$2,000
$1,100
$700
Total
$10,100
$14,000
$11,200
Working:
Details
January
February
March
April
Inventory at cost
$15,000
$15,100
$17,000
$14,000
Inventory at the lower of cost or market
$14,500
$12,600
$15,600
$13,300
Allowance amount required to decline inventory to market
$500
$2,500
$1,400
$700
Gain / loss because of the market fluctuations of inventory
-$2,000
$1,100
$700
PART-2)
Particulars
Debit
Credit
Jan. 31
Dr. Loss Due to Market Decline of Inventory
$500
Cr. Allowance to Reduce Inventory to Market
$500
Feb. 28
Dr. Loss Due to Market Decline of Inventory
$2,000
Cr. Allowance to Reduce Inventory to Market
$2,000
Mar. 31
Dr. Allowance to Reduce Inventory to Market
$1,100
Cr. Recovery of Loss Due to Market Decline of Inventory
$1,100
Apr. 30
Dr. Allowance to Reduce Inventory to Market
$700
Cr. Recovery of Loss Due to Market Decline of Inventory
$700
Particulars
February
March
April
Sales
$29,000
$35,000
$40,000
COGS
Beginning inventory
$15,000
$15,100
$17,000
Purchases
$17,000
$24,000
$26,500
Cost of goods available
$32,000
$39,100
$43,500
Ending Inventory
$15,100
$17,000
$14,000
Cost of goods sold
$16,900
$22,100
$29,500
COGS
$12,100
$12,900
$10,500
Gain / loss because of the market fluctuations of inventory
-$2,000
$1,100
$700
Total
$10,100
$14,000
$11,200
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.