Answered: Ousel Clothing Wholesalers, Inc.…

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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Question

Ousel Clothing Wholesalers, Inc. provided you with the following information regarding inventory as of December

31, 2022:

				Normal
		Selling	Disposal	Profit	NRV	NRV - NP
Item	Cost	Price	Costs	Margin	(Ceiling)	(Floor)	CRC
(a)	(b)	(c)	(d)	(e)	(f) = (c) - (d)	(g) = (f) - (e)	(h)
Shorts - men	$14,600	$38,000	$16,200	$8,200	$21,800	$13,600	$17,600
Jeans - men	21,500	23,900	4,800	3,000	19,100	16,100	17,500
Shirts and blouses	5,700	6,300	3,300	1,900	3,000	1,100	4,200
Skirts	10,500	24,000	5,100	4,600	18,900	14,300	15,500
Jeans - women	17,000	43,900	31,200	1,700	12,700	11,000	9,000

Assume that Ousel uses the individual item approach for computing the necessary lower-of-cost-or-market rule adjustment and that Ousel had a beginning allowance balance of zero.

			Lower of
Item	Cost	Market Value	Cost or Market
Shorts - men	$14,600	$17,600	$14,600
Jeans - men	21,500	17,500	17,500
Shirts and blouses	5,700	3,000	3,000
Skirts	10,500	15,500	10,500
Jeans - women	17,000	11,000	11,000
TOTAL	$69,300		$56,600

Requirements:

a.	What is the journal entry to record the write-down under the direct method?
b.	What is the journal entry to record the write-down under the indirect method?

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