Question

  

Exercise 6-13A Calculate inventory using lower of cost and net realizable value (LO6-6)

[The following information applies to the questions displayed below.]

Home Furnishings reports inventory using the lower of cost and net realizable value (NRV). Below is information related to its year-end inventory.

Inventory	Quantity	Unit Cost			Unit NRV
Furniture	280	$	93		$	108
Electronics	58		480			340

Exercise 6-13A Part 3

3. Record any necessary adjustment to inventory. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
  

Answer 1

Inventory	Quantity (Units)	Cost		NRV		Cost or NRV which ever is lower
		Rate per unit($)	Total Cost	Rate per unit	Total Cost
Furniture	280	$                        93	$       26,040	$                108	$       30,240	$                                     26,040
Electronics	58	$                      480	$       27,840	$                340	$       19,720	$                                     19,720
			$       53,880			$                                     45,760
Because the Lower cost net realizable value is lower than cost, an adjusting entry must be recorded as follows.
	Cost of goods sold A/c dr		$         8,120
	To InventoryA/c			$            8,120
	(53880-45760)
	(Being to adjust inventory)