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Vermont Resources, which uses the FIFO inventory costing method, has the following account balances at December 31, 2019, prior to releasing the financial statements for the year: Merchandise Inventory, ending Cost of Goods Sold Sales Revenue $ 13,000 67,000 120,000 Vermont has determined that the current replacement cost (current market value) of the December 31, 2019, ending merchandise inventory is $12,500. Read the requirements. Requirement 1. Prepare any adjusting journal entry required from the given information. (Record debits first, then credits. Select the explanation on the last line of the journal entry. 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 Accounts and Explanation Debit Credit Dec. 31

Vermont Resources, which uses the FIFO inventory costing method, has the following account balances at December 31, 2019, prior to releasing the financial statements for the year: Merchandise Inventory, ending Cost of Goods Sold Sales Revenue $ 13,000 67,000 120,000 Vermont has determined that the current replacement cost (current market value) of the December 31, 2019, ending merchandise inventory is $12,500. Read the requirements. Requirement 1. Prepare any adjusting journal entry required from the given information. (Record debits first, then credits. Select the explanation on the last line of the journal entry. 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 Accounts and Explanation Debit Credit Dec. 31

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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### Vermont Resources Financial Information **Vermont Resources**, which uses the FIFO inventory costing method, has the following account balances as of December 31, 2019, prior to releasing the financial statements for the year: - **Merchandise Inventory, ending**: $13,000 - **Cost of Goods Sold**: $67,000 - **Sales Revenue**: $120,000 Additionally, Vermont has determined that the current replacement cost (current market value) of the December 31, 2019, ending merchandise inventory is $12,500. ### Requirement 1: **Prepare any adjusting journal entry required from the given information.** _Record debits first, then credits. Select the explanation on the last line of the journal entry. 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._ #### Adjusting Journal Entry Table: | Date | Accounts and Explanation | Debit | Credit | |------------|------------------------------------|-----------|-----------| | Dec. 31 | | | | | | | | | | | | | | | | | | | | | | | | > [End of Table] * This table is left blank for students to fill out based on calculating the required adjusting entry. * Note: Only entries that affect the condition of the merchandise inventory will need to be adjusted. ### Explanation of Inventory Adjustment: The adjusting journal entry is necessary because the market value (replacement cost) of the ending merchandise inventory ($12,500) is lower than its recorded cost ($13,000). According to accounting principles, inventory should be reported at the lower of cost or market value. ### How to Determine Adjustments: 1. **Calculate the Difference:** - Cost of Ending Inventory: $13,000 - Market Value of Ending Inventory: $12,500 2. **Adjustment Amount:** - Difference: $13,000 - $12,500 = $500 3. **Journal Entry:** - Debit: Loss due to Decline in Inventory Value - $500 - Credit: Merchandise Inventory - $500 This helps in accurately reflecting the value of the inventory on the balance sheet, ensuring compliance with accounting standards. --- This transcription includes the pertinent
Transcribed Image Text:### Vermont Resources Financial Information **Vermont Resources**, which uses the FIFO inventory costing method, has the following account balances as of December 31, 2019, prior to releasing the financial statements for the year: - **Merchandise Inventory, ending**: $13,000 - **Cost of Goods Sold**: $67,000 - **Sales Revenue**: $120,000 Additionally, Vermont has determined that the current replacement cost (current market value) of the December 31, 2019, ending merchandise inventory is $12,500. ### Requirement 1: **Prepare any adjusting journal entry required from the given information.** _Record debits first, then credits. Select the explanation on the last line of the journal entry. 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._ #### Adjusting Journal Entry Table: | Date | Accounts and Explanation | Debit | Credit | |------------|------------------------------------|-----------|-----------| | Dec. 31 | | | | | | | | | | | | | | | | | | | | | | | | > [End of Table] * This table is left blank for students to fill out based on calculating the required adjusting entry. * Note: Only entries that affect the condition of the merchandise inventory will need to be adjusted. ### Explanation of Inventory Adjustment: The adjusting journal entry is necessary because the market value (replacement cost) of the ending merchandise inventory ($12,500) is lower than its recorded cost ($13,000). According to accounting principles, inventory should be reported at the lower of cost or market value. ### How to Determine Adjustments: 1. **Calculate the Difference:** - Cost of Ending Inventory: $13,000 - Market Value of Ending Inventory: $12,500 2. **Adjustment Amount:** - Difference: $13,000 - $12,500 = $500 3. **Journal Entry:** - Debit: Loss due to Decline in Inventory Value - $500 - Credit: Merchandise Inventory - $500 This helps in accurately reflecting the value of the inventory on the balance sheet, ensuring compliance with accounting standards. --- This transcription includes the pertinent
### Requirements 1. **Prepare any adjusting journal entry required from the information given.** 2. **What value would Vermont report on the balance sheet at December 31, 2019, for merchandise inventory?** --- This task involves preparing adjusting journal entries and determining the value of merchandise inventory to be reported on the balance sheet for December 31, 2019. To complete these requirements, gather the necessary financial information and apply accounting principles to ensure accurate financial reporting.
Transcribed Image Text:### Requirements 1. **Prepare any adjusting journal entry required from the information given.** 2. **What value would Vermont report on the balance sheet at December 31, 2019, for merchandise inventory?** --- This task involves preparing adjusting journal entries and determining the value of merchandise inventory to be reported on the balance sheet for December 31, 2019. To complete these requirements, gather the necessary financial information and apply accounting principles to ensure accurate financial reporting.
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