Explanation Write-down to market for the stain resistant model under direct method: Date Account Title and Explanation Post ref Debit ($) Credit ($) Cost of goods sold 56,000 Inventory 56,000 (Being write down loss charged to cost of goods sold accounts ) Table (1) Cost of goods sold account is an expense account. Since loss is write-down to cost of goods sold account, the cost of goods sold expense is increased. Therefore, Cost of goods sold account is debited. Inventory is an asset account. Since, inventory is reduced due to loss in write-down. Hence, inventory account is credited. Write-down to market for the stain resistant model under indirect method: Date Account Title and Explanation Post ref Debit ($) Credit ($) Loss on inventory write-down 56,000 Allowance to reduce inventory to market value. 56,000 (Being write down loss charged to allowance to reduce inventory to market value accounts) Table (2) Loss on inventory write-down account is an expense account. Since expense is increased. Therefore, loss on inventory write-down account is debited. Allowance to reduce inventory to market value is part of reserve and surplus...

1st Edition

ISBN: 9780132162302

Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella

Publisher: PEARSON

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Chapter 10, Problem 10.17BE

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To prepare: Journal entry.

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Chapter 10, Problem 10.16BE

Chapter 10, Problem 10.18BE

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Journal entry .

Solution Summary: The author explains the accounting rules regarding journal entries. It records and summarizes financial transaction of an entity in chronological manner.

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To prepare: Journal entry.

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