Recording Inventory at Lower of Cost or Net Realizable Value The records of Loren Company show the following inventory data. Cost Year 1 Beginning inventory $24,000 Year 1 Ending inventory 30,000 Year 2 Ending inventory 48,000 Year 3 Ending inventory 24,000 Year 4 Ending inventory 72,000 Year 5 Ending inventory 48,000 Year 6 Ending inventory. 60,000 Net Realizable Value $24,000 36,000 45,000 18,000 60.000 42,000 66.000 Record the journal entry required for each year, Year 1 through Year 6, to apply the lower of cost or net realizable value rule to inventory assuming that the company adjusts inventory through the allowance account and adjusts equity through cost of goods sold. Assume that the allowance is only adjusted at the end of the year and that for each year, all of the beginning inventory is sold by the end of the year. Note: If a journal entry isn't required on any of the dates shown, select "N/A-debit" and "N/A-credit" as the account names and leave the Dr. and Cr. answers blank (zero).
Recording Inventory at Lower of Cost or Net Realizable Value The records of Loren Company show the following inventory data. Cost Year 1 Beginning inventory $24,000 Year 1 Ending inventory 30,000 Year 2 Ending inventory 48,000 Year 3 Ending inventory 24,000 Year 4 Ending inventory 72,000 Year 5 Ending inventory 48,000 Year 6 Ending inventory. 60,000 Net Realizable Value $24,000 36,000 45,000 18,000 60.000 42,000 66.000 Record the journal entry required for each year, Year 1 through Year 6, to apply the lower of cost or net realizable value rule to inventory assuming that the company adjusts inventory through the allowance account and adjusts equity through cost of goods sold. Assume that the allowance is only adjusted at the end of the year and that for each year, all of the beginning inventory is sold by the end of the year. Note: If a journal entry isn't required on any of the dates shown, select "N/A-debit" and "N/A-credit" as the account names and leave the Dr. and Cr. answers blank (zero).
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Recording Inventory at Lower of Cost or Net Realizable Value
The records of Loren Company show the following inventory data.
Cost
Year 1 Beginning inventory $24,000
Year 1 Ending inventory 30,000
Year 2 Ending inventory
48,000
Year 3 Ending inventory
24,000
Year 4 Ending inventory
72,000
Year 5 Ending inventory
48,000
Year 6 Ending inventory 60,000
Date
Dec. 31, Year 1 N/A-debit
Record the journal entry required for each year, Year 1 through Year 6, to apply the lower of cost or net realizable value rule to inventory assuming that the company adjusts inventory through the allowance account and adjusts equity through cost of goods sold. Assume that the
allowance is only adjusted at the end of the year and that for each year, all of the beginning inventory is sold by the end of the year.
• Note: If a journal entry isn't required on any of the dates shown, select "N/A-debit" and "N/A-credit" as the account names and leave the Dr. and Cr. answers blank (zero).
Dec. 31, Year 2 Cost of Goods Sold
N/A-credit
To record adjustment.
Dec. 31, Year 3 Cost of Goods Sold
Net Realizable
Value
Dec. 31, Year 4 Cost of Goods Sold
$24,000
36,000
Allowance to Reduce Inventory to Net Realizable Value
To record adjustment.
45,000
18,000
60,000
42,000
66,000
Dec. 31, Year 5 Cost of Goods Sold
Account Name
Allowance to Reduce Inventory to Net Realizable Value
To record adjustment.
Dec. 31, Year 6 Cost of Goods Sold
Allowance to Reduce Inventory to Net Realizable Value
To record adjustment.
Allowance to Reduce Inventory to Net Realizable Value
To record adjustment.
Allowance to Reduce Inventory to Net Realizable Value
To record adjustment.
> >
Dr.
0
0
3,000
0
3,000
6,000
12,000
0
0
0
Cr.
0
0✔
0
3,000
0
3,000
0
6,000 ✓
0x
13,000 *
0x
0x
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