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28 February, 21:13

Ace Manufacturing purchased merchandise inventory for $8,000. At the end of the accounting period it has a market value of $7,800. Using the lower-of-cost-or-market rule, what is the journal entry to record the adjustment

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  1. 28 February, 21:37
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    Dr. Cr.

    Cost of Goods Sold $200

    Merchandise Inventory $200

    Explanation:

    Inventory is value at Lower of Cost and Net realizable value.

    Cost of Inventory = $8,000

    Net Realizable Value of Inventory = $7,800

    The lower value is the Net realizable value and Inventory should be reported by $7,800 on the balance sheet. The net difference of $200 is adjusted to bring the value of inventory to it net realizable value.

    Expense to be recorded = $8,000 - $7,800 = $200
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Home » Business » Ace Manufacturing purchased merchandise inventory for $8,000. At the end of the accounting period it has a market value of $7,800. Using the lower-of-cost-or-market rule, what is the journal entry to record the adjustment
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