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27 January, 04:22

On April 1, Robert LLC purchased two units of inventory, A and B. The cost of unit A was $655, and the cost of unit B was $555. On April 30, Robert LLC had not sold the inventory. The market value of unit A was now $670 while the market value of unit B was $470. The adjustment associated with the lower-of-cost-or-market method on April 30 will be:

Cost of Goods Sold 70

Inventory 70

Inventory 70

Cost of Goods Sold 70

Cost of Goods Sold 85

Inventory 85

Inventory 85

Cost of Goods Sold 85

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  1. 27 January, 04:31
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    Cost of Goods Sold 85

    Inventory 85

    Explanation:

    According to Generally Accepted Accounting Principles (GAAP), the inventory should be recorded at cost or market value whichever is lower.

    So, in this question, we consider the cost and market value of unit B not unit A as it has already lower values

    Cost of unit B = $555

    And, the market value of unit B = $470

    So, the difference is $85 ($555 - $470) would be adjusted

    So, the adjusting entry would be

    Cost of Goods Sold A/c Dr $85

    To Inventory $85

    (Being the inventory is adjusted)
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