At the end of January, the company estimates that the remaining units of inventory purchased on January 12 are expected to sell in February for only $100 each. Record the adjusting entry for net realizable value.
At the end of January, the company estimates that the remaining units of inventory purchased on January 12 are expected to sell in February for only $100 each. Record the adjusting entry for net realizable value.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter6: Cost Of Goods Sold And Inventory
Section: Chapter Questions
Problem 48E
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Question
On January 1, 2024, the general ledger of Big Blast Fireworks includes the following account balances:
Accounts | Debit | Credit |
---|---|---|
Cash | $24,300 | |
Accounts Receivable | 42,500 | |
Allowance for Uncollectible Accounts | $2,700 | |
Inventory | 42,000 | |
Land | 79,600 | |
Accounts Payable | 29,200 | |
Notes Payable (8%, due in 3 years) | 42,000 | |
Common Stock | 68,000 | |
46,500 | ||
Totals | $188,400 | $188,400 |
The $42,000 beginning balance of inventory consists of 420 units, each costing $100. During January 2024, Big Blast Fireworks had the following inventory transactions:
January 3 | Purchase 1,050 units for $115,500 on account ($110 each). |
---|---|
January 8 | Purchase 1,150 units for $132,250 on account ($115 each). |
January 12 | Purchase 1,250 units for $150,000 on account ($120 each). |
January 15 | Return 160 of the units purchased on January 12 because of defects. |
January 19 | Sell 3,600 units on account for $576,000. The cost of the units sold is determined using a FIFO perpetual inventory system. |
January 22 | Receive $529,000 from customers on accounts receivable. |
January 24 | Pay $359,000 to inventory suppliers on accounts payable. |
January 27 | Write off accounts receivable as uncollectible, $2,100. |
January 31 | Pay cash for salaries during January, $110,000. |
The following information is available on January 31, 2024.
- At the end of January, the company estimates that the remaining units of inventory purchased on January 12 are expected to sell in February for only $100 each. [Hint: Determine the number of units remaining from January 12 after subtracting the units returned on January 15 and the units assumed sold (FIFO) on January 19.]
- The company records an
adjusting entry for $5,070 for estimated future uncollectible accounts. - The company accrues interest on notes payable for January. Interest is expected to be paid each December 31.
- The company accrues income taxes at the end of January of $13,500.
record all 4
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