On January 1, 2020, the general ledger of Redbud Company
includes the following account balances:
Accounts | Debit | Credit | ||||
Cash | $ | 25,100 | ||||
Accounts Receivable | 44,500 | |||||
Inventory | 46,000 | |||||
Land | 85,600 | |||||
Allowance for Uncollectible Accounts | 3,500 | |||||
Accounts Payable | 27,200 | |||||
Notes Payable (9%, due in 3 years) | 46,000 | |||||
Common Stock | 72,000 | |||||
Retained Earnings | 52,500 | |||||
Totals | $ | 201,200 | $ | 201,200 | ||
The $46,000 beginning balance of inventory consists of 460 units, each costing $100. During January 2020, Redbud had the following inventory transactions:
January 3 | Purchase 1,450 units for $158,050 on account ($109 each). |
January 8 | Purchase 1,550 units for $176,700 on account ($114 each). |
January 12 | Purchase 1,650 units for $196,350 on account ($119 each). |
January 15 | Return 180 of the units purchased on January 12 because of defects. |
January 19 |
Sell 4,800 units on account for $720,000. The cost of the units sold is determined using a FIFO perpetual inventory system. |
January 22 | Receive $705,000 from customers on accounts receivable. |
January 24 | Pay $500,000 to inventory suppliers on accounts payable. |
January 27 | Write off accounts receivable as uncollectible, $2,500. |
January 31 | Pay cash for salaries during January, $135,000. |
The following information is available on January 31, 2020.
I need help with the question below
what is the adjusting entry, if any, to adjust inventory to lower of cost or NRV?
Since Loss on writedown is small value as compared to cost of goods sold, we can account loss to Cost of goods sold |
In case its higher value, it must be taken to a separate account like Loss on Inventory Write Down |
Here, we will take it to Cost of goods sold |
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