**Inventory Adjustment Example for Educational Purposes**Assume that a Rocket Burger restaurant has a perpetual inventory record for hamburger patties. The task is to determine the necessary adjustments to the inventory value using the lower-of-cost-or-market rule. **Scenario:**- As of July 31, the accountant identifies that the market replacement cost for the ending inventory is $520.- The required adjustment should ensure the merchandise inventory on the balance sheet reflects this current value.**Data Table Overview:**- The data table provides information on purchases, cost of goods sold, and merchandise inventory on hand:| Date | Purchases | Cost of Goods Sold | Merchandise Inventory on Hand ||--------|-----------|--------------------|-------------------------------|| Jul. 9 | | $440 | $440 || Jul. 22| | $200 | $240 || Jul. 31| $330 | | $570 |**Adjustment Instructions:**- Make any necessary adjusting entries for July 31 to align the recorded value with the lower cost option.- If cost exceeds market value ($520), calculate the adjustment needed to reduce inventory from its recorded amount ($570) to the market value.**Journal Entry Requirements:**- Record debits first, then credits.- Exclude explanations from journal entries.- If no adjustment is needed, select "No entry required" in the "Accounts" column and leave other cells blank.This example illustrates a practical application of the lower-of-cost-or-market rule, an essential concept in inventory management and financial accounting. ### Vermont Resources Inventory AdjustmentVermont Resources, which uses the FIFO (First-In, First-Out) inventory costing method, has the following account balances as of August 31, 2025, before releasing the financial statements for the year:- **Merchandise Inventory, ending:** $14,800- **Cost of Goods Sold:** $67,000- **Net Sales Revenue:** $118,000Vermont determined the current replacement cost (current market value) of the ending merchandise inventory, as of August 31, 2025, to be $12,500.#### Requirements1. Prepare any adjusting journal entry required from the given information.2. Determine the value Vermont would report on the balance sheet as of August 31, 2025, for merchandise inventory.#### Journal Entry TableA table is provided for recording the adjusting journal entry:- **Columns:** Date, Accounts and Explanation, Debit, Credit- The first row for date is labeled "Aug. 31."- Users are instructed to record debits first, then credits, and to leave all other cells blank if no entry is required.#### Requirements Dialog BoxA pop-up box titled "Requirements" presents the tasks. It includes two tasks related to journal entries and inventory valuation. There are options to print or indicate completion with "Print" and "Done" buttons.This educational exercise helps students practice the application of the lower of cost or market rule in inventory accounting and journal entry preparation.

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Assume that a Rocket Burger restaurant has the following perpetual inventory record for hamburger patties: (Click the icon to view the perpetual inventory record.) At July 31, the accountant for the restaurant determines that the current replacement cost of the ending merchandise inventory is $520. Make any adjusting entry needed to apply the lower-of-cost-or-market rule. Merchandise inventory would be reported on the balance sheet at what value on July 31? Make any adjusting entry needed to apply the lower-of-cost-or-market rule. (Record debits first, then credits. Exclude explanations from journal entries. For situations that do not require an entry, make sure to select "No entry required" in the first cell in the "Accounts" column and leave all other cells blank.) Date Jul, 31 Accounts Debit Credit Data table Date Jul. 9 Jul. 22 Jul. 31 Purchases S 440 330 Print Cost of Goods Sold $ 200 Merchandise Inventory on Hand $ 440 240 570 Done X

Assume that a Rocket Burger restaurant has the following perpetual inventory record for hamburger patties: (Click the icon to view the perpetual inventory record.) At July 31, the accountant for the restaurant determines that the current replacement cost of the ending merchandise inventory is $520. Make any adjusting entry needed to apply the lower-of-cost-or-market rule. Merchandise inventory would be reported on the balance sheet at what value on July 31? Make any adjusting entry needed to apply the lower-of-cost-or-market rule. (Record debits first, then credits. Exclude explanations from journal entries. For situations that do not require an entry, make sure to select "No entry required" in the first cell in the "Accounts" column and leave all other cells blank.) Date Jul, 31 Accounts Debit Credit Data table Date Jul. 9 Jul. 22 Jul. 31 Purchases S 440 330 Print Cost of Goods Sold $ 200 Merchandise Inventory on Hand $ 440 240 570 Done X

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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