Question

In: Accounting

Bonnie Denim Company sells blue jeans. Last year, skinny jeans were fashionable;

Bonnie Denim Company sells blue jeans. Last year, skinny jeans were fashionable; this year, relaxed-fit jeans are in style. The company has 415 units of skinny jeans with a cost of $19 per unit and a market value of $17 per unit. The inventory also includes 1,040 units of relaxed-fit jeans with a cost of $18 per unit and a market value of $21 per unit.

Required:

Prepare the journal entry, if any, that is required to adjust the Inventory account. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Solutions

Expert Solution

a) The Adjustment Entry is required when the Market value of Inventory is lower than the Cost of Inventory. In the given case, the market value of Skinny Jeans is lower ($17) than the Cost of Inventory ($19), so an adjusting entry is required to record the loss of $830. [415 units*($19-$17)].

 

For Relaxed Fit Jeans, the Market Value is higher than ($21) than the the Cost of Inventory($18), so no adjusting entry is required.

 

Journal Entry for Cost of Merchandise Sold:

Transaction General Journal Debit Credit

a) Cost of Goods Sold 830 

Inventory 830

(To adjust the market value of Skinny Jeans)

Cost of Goods Sold 830 

Inventory 830

S Mahalaxmi answered 3 years ago
Next > < Previous

Related Solutions

You have a company that manufactures denim jeans and denim jackets.   A denim jeans costs 5$...
You have a company that manufactures denim jeans and denim jackets.   A denim jeans costs 5$ to make and uses 2 yards of denim. You sell the denim jeans for $25.00 A denim jacket costs 12$ to make and uses 3 yards of denim. You sell the denim jacket for $40.00. You have 300 yards of denim. You need to sell at least 10 jeans and 10 jackets in a year. How many jeans and jackets would you have to...
Burlington Mills produces denim cloth that it sells to jeans manufacturers. It is negotiating a new...
Burlington Mills produces denim cloth that it sells to jeans manufacturers. It is negotiating a new contract to provide cloth on a weekly basis to BJ Jeans. The demand for cloth from BJ Jeans is expected to vary each week according the following discrete probability distribution: Demand (yd) 0 0.05 100 0.15 200 0.40 300 0.30 400 0.10 Burlington’s plant capacity available for this new job will vary each week because of other commitments and occasional breakdowns. Burlington estimates that...
Helen Croker owns Divine Denim, a growing company making made to measure, designer denim jeans and...
Helen Croker owns Divine Denim, a growing company making made to measure, designer denim jeans and jackets. She uses organic yarn-dyed cotton denim of different weights depending on the garment that she is making. Although she prefers to take the measurements herself, she is now making denim clothes for international customers using the self-measuring system she has developed and put online. For her custom clients, she takes measurements or uses the measurements supplied through her customers’ online application. She uses...
Jeans Co. sells blue jeans wholesale to major retailers across the country. Each pair of jeans...
Jeans Co. sells blue jeans wholesale to major retailers across the country. Each pair of jeans has a selling price of $30 with $20 in variable costs of goods sold. The company has fixed manufacturing costs of $1,150,000 and fixed marketing costs of $250,000. Sales commissions are paid to the wholesale sales reps at 10​% of revenues. The company has an income tax rate of 25​% 1. How many jeans must Just for Kids Just for Kids sell in order...
1. Southwest Clothing Company, produces denim jeans, is planning to introduce a new line of lime...
1. Southwest Clothing Company, produces denim jeans, is planning to introduce a new line of lime green jeans. Each pair of jeans costs $5.50 for fabric and $3.00 for labor. Each pair will be sold for $24.99 each. Fixed costs are estimated as $10,000 per month. Southwest intends to build an EXCEL model to explore the options for production. a. Set up a spreadsheet model to calculate total profit with production quantity as the decision variable - assuming that Southwest...
Burke's Corner currently sells blue jeans and T-shirts. Management is considering adding fleece tops to its...
Burke's Corner currently sells blue jeans and T-shirts. Management is considering adding fleece tops to its inventory to provide a cooler weather option. The tops would sell for $53 each with expected sales of 4,300 tops annually. By adding the fleece tops, management feels the firm will sell an additional 285 pairs of jeans at $65 a pair and 420 fewer T-shirts at $26 each. The variable cost per unit is $36 on the jeans, $16 on the T-shirts, and...
Burke's Corner currently sells blue jeans and T-shirts. Management is considering adding fleece tops to its...
Burke's Corner currently sells blue jeans and T-shirts. Management is considering adding fleece tops to its inventory to provide a cooler weather option. The tops would sell for $54 each with expected sales of 3,850 tops annually. By adding the fleece tops, management feels the firm will sell an additional 240 pairs of jeans at $64 a pair and 375 fewer T-shirts at $25 each. The variable cost per unit is $32 on the jeans, $16 on the T-shirts, and...
The following data is related to sales and production for Blue sky company for last year....
The following data is related to sales and production for Blue sky company for last year. Selling price per unit $140 Variable manufacturing costs per unit $62 Variable selling and administrative expenses per unit $6 Fixed manufacturing overhead (in total) $32,000 Fixed selling and administrative expenses (in total) $6000 Units produced during the year 2000 Units sold during year 900 a) Using variable costing, what is the operating income for last year? b) Management is considering the following courses of...
Han Corp's sales last year were $315,000, and its year-end receivables were $52,500. The firm sells...
Han Corp's sales last year were $315,000, and its year-end receivables were $52,500. The firm sells on terms that call for customers to pay 30 days after the purchase, but some delay payment beyond Day 30. On average, how many days late do customers pay? Base your answer on this equation: DSO – Allowed credit period = Average days late, and use a 365-day year when calculating the DSO. Assume all sales to be on credit. Do not round your...
Harper Corp.'s sales last year were $425,000, and its year-end receivables were $42,500. Harper sells on...
Harper Corp.'s sales last year were $425,000, and its year-end receivables were $42,500. Harper sells on terms that call for customers to pay 30 days after the purchase, but many delay payment beyond Day 30. On average, how many days late do customers pay? Base your answer on this equation: DSO -Allowed credit period = Average days late, and use a 365-day year when calculating the DSO. Answers: a. 6.50 b. 8.37 c. 9.27 d. 8.81 e. 9.74
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT