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Some of J and B Electronics' merchandise is gathering dust. It is now December 31, 2024, and the current replacement cost of the ending merchandise inventory is $14,000 below the business's cost of the goods, which was $95,000. Before any adjustments at the period, the company's Cost of Goods Sold account has a balance of $400,000. Read the requirements. Requirement 1. Journalize any required entries. (Record debits first, then credits. Select the explanation on the last line of the journal entry table. For situations that do not require an entry, make sure to select "No Entry Required" in the first cell in the "Accounts" co leave all other cells blank.) The required journal entry would be: Date Dec. 31 Accounts and Explanation Debit Credit Requirements 1. Journalize any required entries. 2. At what amount should the company report merchandise inventory on the balance sheet? 3. At what amount should the company report cost of goods sold on the income statement? 4. Which accounting principle or concept is most relevant to this situation? Print Done

Some of J and B Electronics' merchandise is gathering dust. It is now December 31, 2024, and the current replacement cost of the ending merchandise inventory is $14,000 below the business's cost of the goods, which was $95,000. Before any adjustments at the period, the company's Cost of Goods Sold account has a balance of $400,000. Read the requirements. Requirement 1. Journalize any required entries. (Record debits first, then credits. Select the explanation on the last line of the journal entry table. For situations that do not require an entry, make sure to select "No Entry Required" in the first cell in the "Accounts" co leave all other cells blank.) The required journal entry would be: Date Dec. 31 Accounts and Explanation Debit Credit Requirements 1. Journalize any required entries. 2. At what amount should the company report merchandise inventory on the balance sheet? 3. At what amount should the company report cost of goods sold on the income statement? 4. Which accounting principle or concept is most relevant to this situation? Print Done

FINANCIAL ACCOUNTING
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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### Scenario Description Some of J and B Electronics' merchandise is gathering dust. It is now December 31, 2024, and the current replacement cost of the ending merchandise inventory is $14,000 below the business’s cost of the goods, which was $95,000. Before any adjustments at the end of the period, the company’s Cost of Goods Sold account has a balance of $400,000. ### Requirements 1. Journalize any required entries. 2. At what amount should the company report merchandise inventory on the balance sheet? 3. At what amount should the company report cost of goods sold on the income statement? 4. Which accounting principle or concept is most relevant to this situation? ### Journal Entry Table A table is provided to record the required journal entry: - **Date:** Dec. 31 - **Columns:** - Accounts and Explanation - Debit - Credit The user is prompted to: - Record debits first, then credits. - Select the explanation on the last line of the journal entry table. - Use "No Entry Required" in the "Accounts" column if no entry is needed, leaving other cells blank. ### Explanation Box Contains the following instructions: - **Print Button:** Allows for printing the requirements. - **Done Button:** Indicates completion of the task. These instructions guide the recording of necessary adjustments and reporting amounts according to accounting principles relevant to inventory management and cost reporting.
Transcribed Image Text:### Scenario Description Some of J and B Electronics' merchandise is gathering dust. It is now December 31, 2024, and the current replacement cost of the ending merchandise inventory is $14,000 below the business’s cost of the goods, which was $95,000. Before any adjustments at the end of the period, the company’s Cost of Goods Sold account has a balance of $400,000. ### Requirements 1. Journalize any required entries. 2. At what amount should the company report merchandise inventory on the balance sheet? 3. At what amount should the company report cost of goods sold on the income statement? 4. Which accounting principle or concept is most relevant to this situation? ### Journal Entry Table A table is provided to record the required journal entry: - **Date:** Dec. 31 - **Columns:** - Accounts and Explanation - Debit - Credit The user is prompted to: - Record debits first, then credits. - Select the explanation on the last line of the journal entry table. - Use "No Entry Required" in the "Accounts" column if no entry is needed, leaving other cells blank. ### Explanation Box Contains the following instructions: - **Print Button:** Allows for printing the requirements. - **Done Button:** Indicates completion of the task. These instructions guide the recording of necessary adjustments and reporting amounts according to accounting principles relevant to inventory management and cost reporting.
# Understanding Inventory Records and Lower-of-Cost-or-Market Adjustments ## Scenario Assume that a Rocket Burger restaurant maintains a perpetual inventory record for hamburger patties. This involves keeping detailed ongoing records of inventory transactions and balances. **Current Situation on July 31**: An accountant determines that the current replacement cost of the ending merchandise inventory is $520. An adjustment is necessary to apply the lower-of-cost-or-market rule, impacting the reported merchandise inventory value on the balance sheet as of July 31. ## Instructions for Journal Entry Make a journal entry to adjust the inventory to its lower replacement cost, ensuring the debits appear before the credits. If no entry is required, select "No entry required" in the first cell in the "Accounts" column, leaving other cells blank. **Date:** - Jul. 31 **Journal Entry Table:** | Date | Accounts | Debit | Credit | |--------|-----------|-------|--------| | Jul. 31| | | | ## Inventory Data Table The data table details transactions for the month: | **Date** | **Purchases** | **Cost of Goods Sold** | **Merchandise Inventory on Hand** | |----------|---------------|------------------------|----------------------------------| | Jul. 9 | | $440 | $440 | | Jul. 22 | | $200 | $240 | | Jul. 31 | $330 | | $570 | - **Jul. 9**: Starting with a balance in Cost of Goods Sold, matching the inventory on hand. - **Jul. 22**: A portion of the inventory is sold, reducing the amount on hand. - **Jul. 31**: Additional purchases are recorded, increasing the on-hand inventory. ## Conclusion To comply with the lower-of-cost-or-market rule, Rocket Burger must adjust its balance sheet inventory valuation to $520 as of July 31. The data table outlines the timing of purchases and inventory changes, assisting in the preparation of accurate financial statements. Remember to report these adjustments accurately to reflect the inventory's market conditions!
Transcribed Image Text:# Understanding Inventory Records and Lower-of-Cost-or-Market Adjustments ## Scenario Assume that a Rocket Burger restaurant maintains a perpetual inventory record for hamburger patties. This involves keeping detailed ongoing records of inventory transactions and balances. **Current Situation on July 31**: An accountant determines that the current replacement cost of the ending merchandise inventory is $520. An adjustment is necessary to apply the lower-of-cost-or-market rule, impacting the reported merchandise inventory value on the balance sheet as of July 31. ## Instructions for Journal Entry Make a journal entry to adjust the inventory to its lower replacement cost, ensuring the debits appear before the credits. If no entry is required, select "No entry required" in the first cell in the "Accounts" column, leaving other cells blank. **Date:** - Jul. 31 **Journal Entry Table:** | Date | Accounts | Debit | Credit | |--------|-----------|-------|--------| | Jul. 31| | | | ## Inventory Data Table The data table details transactions for the month: | **Date** | **Purchases** | **Cost of Goods Sold** | **Merchandise Inventory on Hand** | |----------|---------------|------------------------|----------------------------------| | Jul. 9 | | $440 | $440 | | Jul. 22 | | $200 | $240 | | Jul. 31 | $330 | | $570 | - **Jul. 9**: Starting with a balance in Cost of Goods Sold, matching the inventory on hand. - **Jul. 22**: A portion of the inventory is sold, reducing the amount on hand. - **Jul. 31**: Additional purchases are recorded, increasing the on-hand inventory. ## Conclusion To comply with the lower-of-cost-or-market rule, Rocket Burger must adjust its balance sheet inventory valuation to $520 as of July 31. The data table outlines the timing of purchases and inventory changes, assisting in the preparation of accurate financial statements. Remember to report these adjustments accurately to reflect the inventory's market conditions!
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