The December 31, 2014 inventory of Risen Company consisted of four products, for

Question

The December 31, 2014 inventory of Risen Company consisted of four products, for which certain information is provided below.

Original

Replacement

Estimated

Expected

Normal Profit

Product

Qty

Cost

Cost

Disposal Cost

Selling Price

on Sales

A

1

$25

$22

$6.50

$40

$8

B

1

$42

$40

$12

$48

$12

C

1

$120

$115

$25

$190

$57

D

1

$18

$15.80

$3

$30

$2.60

Prepare the journal entry needed to record Risen’s inventory at the lower-of-cost-or-market. Assume that Risen uses the loss method and an allowance account. The allowance account had a zero balance as of January 1, 2014.

Original

Replacement

Estimated

Expected

Normal Profit

Product

Qty

Cost

Cost

Disposal Cost

Selling Price

on Sales

A

1

$25

$22

$6.50

$40

$8

B

1

$42

$40

$12

$48

$12

C

1

$120

$115

$25

$190

$57

D

1

$18

$15.80

$3

$30

$2.60

Explanation / Answer

Answer:

Allowance to Reduce Inventory to Market A/C dr. $11

                   To Loss Recovery Due to Market Valuation A/C    $11 (205-194)

Product Ceiling Floor Designated market Cost Lower of cost or Market value A $33.50 $25.50 $25.50 $25 $25 B $36.00 $24.00 36 $42 $36 C $165.00 $108.00 115 $120 $115 D $27.00 $24.40 24.4 $18 $18 $194

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.