Unearned Revenue: Unearned revenue is the revenue which is earned in advance, ahead of goods supplied or services performed. As per the revenue recognition principle it is not recorded in the books of accounts until earned. Hence, this is considered as a liability for the business. Adjusting Entries Adjusting entries indicates those entries, which are passed in the books of accounts at the end of one accounting period. These entries are passed in the books of accounts as per the revenue recognition principle, and the expenses recognition principle to adjust the revenue, and the expenses of a business in the period of their occurrence. Rule of Debit and Credit: Debit - Increase in all assets, expenses & dividends, and decrease in all liabilities and stockholders’ equity . Credit - Increase in all liabilities and stockholders’ equity, and decrease in all assets & expenses. To record: The given adjustment related to the unearned rent is recorded in the journal of the company H.

Question

Home Stop sells two product categories, furniture and accessories. Information pertaining to its year-end inventory is as follows: Inventory, by Product Category Quantity Per Unit Cost Market Furniture: Chairs 50 $ 26 $ 32 Desks 20 74 59 Tables 70 85 93 Accessories: Rugs 50 61 49 Lamps 30 23 19 Required: (already completed this part) Determine the carrying value of inventory at year-end, assuming the lower of cost or market (LCM) rule is applied to (a) individual products, (b) product categories, and (c) total inventory. Assuming inventory write-downs are common for Home Stop, record any necessary year-end adjusting entry for each of the LCM applications in requirement 1. Stuck here: Record the year-end adjustment for inventory assuming the lower of cost or net realizable value (LCNRV) rule is applied to individual products, product categories, total inventory.

Answer 1

Question

Chapter 3, Problem 3.4BPE

To determine

Unearned Revenue:

Unearned revenue is the revenue which is earned in advance, ahead of goods supplied or services performed. As per the revenue recognition principle it is not recorded in the books of accounts until earned. Hence, this is considered as a liability for the business.

Adjusting Entries

Adjusting entries indicates those entries, which are passed in the books of accounts at the end of one accounting period. These entries are passed in the books of accounts as per the revenue recognition principle, and the expenses recognition principle to adjust the revenue, and the expenses of a business in the period of their occurrence.

Rule of Debit and Credit:

Debit - Increase in all assets, expenses & dividends, and decrease in all liabilities and stockholders’ equity.

Credit - Increase in all liabilities and stockholders’ equity, and decrease in all assets & expenses.

To record: The given adjustment related to the unearned rent is recorded in the journal of the company H.

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Home Stop sells two product categories, furniture and accessories. Information pertaining to its year-end inventory is as follows: Inventory, by Product Category Quantity Per Unit Cost Market Furniture: Chairs 50 $ 26 $ 32 Desks 20 74 59 Tables 70 85 93 Accessories: Rugs 50 61 49 Lamps 30 23 19 Required: (already completed this part) Determine the carrying value of inventory at year-end, assuming the lower of cost or market (LCM) rule is applied to (a) individual products, (b) product categories, and (c) total inventory. Assuming inventory write-downs are common for Home Stop, record any necessary year-end adjusting entry for each of the LCM applications in requirement 1. Stuck here: Record the year-end adjustment for inventory assuming the lower of cost or net realizable value (LCNRV) rule is applied to individual products, product categories, total inventory.

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