Kumar Inc. uses a perpetual inventory system. At January 1, 2014, inventory was

Question

Kumar Inc. uses a perpetual inventory system. At January 1, 2014, inventory was $214,000 at both cost and market value. At December 31, 2014, the inventory was $286,000 at cost and $265,000 at market value.

Prepare the necessary December 31 entry under (a) the cost-of-goods-sold method

(b) Loss method. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No. Account Titles and Explanation Debit Credit

(a)___________________    _______________    __________________

_____________________      ______________     __________________

(b) _________________      _______________    __________________

____________________      ________________   __________________

Explanation / Answer

No Account Title & Explaination Debit Credit a) Cost of Good Sold (286000-265000) 21000 Inventory 21000 b) Loss due to decline of inventory to net realizable value (286000-265000) 21000 Inventory 21000

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