Ameto $3 $4 B C D $2 $5 Realizable Value $4 $2 $4 $2 Down per Unit 2 ▬▬▬ 3 3,000 1,500 7,000 3,000 Down 30,000 9,000 What is the journal entry to record the lower of cost or market adjustment? Ending Inver
Ameto $3 $4 B C D $2 $5 Realizable Value $4 $2 $4 $2 Down per Unit 2 ▬▬▬ 3 3,000 1,500 7,000 3,000 Down 30,000 9,000 What is the journal entry to record the lower of cost or market adjustment? Ending Inver
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:**Chapter 7 (Continued) - Practice Problem (10/12/22)**
### Lower of Cost or Market
| Item | Cost | Net Realizable Value | Write Down per Unit | Quantity | Total Write Down |
|------|------|----------------------|---------------------|----------|------------------|
| A | $3 | $4 | - | 3,000 | - |
| B | $4 | $2 | 2 | 1,500 | 30,000 |
| C | $2 | $4 | - | 7,000 | - |
| D | $5 | $2 | 3 | 3,000 | 9,000 |
**Note:**
- For Items A and C, no entry is required because the value is greater than the cost.
### Question:
What is the journal entry to record the lower of cost or market adjustment?
---
In this practice problem, students are tasked with assessing the need for inventory write-downs based on the Lower of Cost or Market rule. The table provided lists various items alongside their cost, net realizable value, and necessary write-downs per unit to make informed financial adjustments.
![### Chapter 7 (Continued) 10/19/22 Practice Problem
#### Objective
Calculate the Inventory Turnover and Days to Sell Inventory for GameStop Corp. using the data provided. All amounts are in millions.
#### Data Table
| | 2018 | 2017 |
|------------------|-------|-------|
| Cost of Goods Sold | $5,980 | $6,060 |
| Beginning Inventory | 1,250 | 1,120 |
| Ending Inventory | 1,250 | 1,250 |
#### Calculations
**Inventory Turnover 2017**
Formula:
\[
\text{Inventory Turnover} = \frac{\text{Cost of Goods Sold}}{\text{Average Inventory}}
\]
Calculation:
\[
\text{Average Inventory for 2017} = \frac{1,120 + 1,250}{2}
\]
\[
\text{Inventory Turnover} = \frac{6,060}{\text{Average Inventory for 2017}}
\]
**Days to Sell Inventory 2017**
Formula:
\[
\text{Days to Sell Inventory} = \frac{365}{\text{Inventory Turnover}}
\]
**Inventory Turnover 2018**
- Calculate similarly using the 2018 data.
**Days to Sell Inventory 2018**
- Calculate similarly using the 2018 Inventory Turnover.
Note: Fill in the blanks with the calculated values once computed.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbcd2d27a-56f0-42f1-82ee-dc77a8a42b09%2F48640824-60dc-4be2-8e54-354e14d267ba%2Fvvl6a7_processed.jpeg&w=3840&q=75)
Transcribed Image Text:### Chapter 7 (Continued) 10/19/22 Practice Problem
#### Objective
Calculate the Inventory Turnover and Days to Sell Inventory for GameStop Corp. using the data provided. All amounts are in millions.
#### Data Table
| | 2018 | 2017 |
|------------------|-------|-------|
| Cost of Goods Sold | $5,980 | $6,060 |
| Beginning Inventory | 1,250 | 1,120 |
| Ending Inventory | 1,250 | 1,250 |
#### Calculations
**Inventory Turnover 2017**
Formula:
\[
\text{Inventory Turnover} = \frac{\text{Cost of Goods Sold}}{\text{Average Inventory}}
\]
Calculation:
\[
\text{Average Inventory for 2017} = \frac{1,120 + 1,250}{2}
\]
\[
\text{Inventory Turnover} = \frac{6,060}{\text{Average Inventory for 2017}}
\]
**Days to Sell Inventory 2017**
Formula:
\[
\text{Days to Sell Inventory} = \frac{365}{\text{Inventory Turnover}}
\]
**Inventory Turnover 2018**
- Calculate similarly using the 2018 data.
**Days to Sell Inventory 2018**
- Calculate similarly using the 2018 Inventory Turnover.
Note: Fill in the blanks with the calculated values once computed.
Expert Solution
Step 1
1) The Written Down for Item B is $2 per unit, so total amount for item B is 1,500 x 2 = 3,000
The written down for item D is $ 3 per unit, so total amount for item D is 3,000 x 3 = 9,000
So Total Amount to be written down is 3,000 + 9,000 = 12,000
Below will be the Journal entry
| Accounts | Debit | Credit |
| Cost of Goods Sold | 12,000 | |
| Inventory | 12,000 |
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