Question
In: Accounting
Janis Company correctly applies the Lower of Cost or Net Realizable Value procedure to its inventory...
Janis Company correctly applies the Lower of Cost or Net Realizable Value procedure to its inventory on a per-unit basis.
Information for Janis' seven products at the end of 2020 is as follows:
| Product | Quantity | Cost per unit | Selling Price | Cost to complete for sale |
| A | 900 | 5.10 | 7.25 | 1.90 |
| B | 1200 | 4.30 | 5.40 | 1.20 |
| C | 800 | 7.20 | 8.00 | 0.70 |
| D | 1000 | 5.75 | 6.20 | 0.55 |
| E | 700 | 3.60 | 5.20 | 0.80 |
| F | 800 | 4.80 | 6.25 | 1.10 |
| G | 900 | 2.90 | 4.00 | 1.45 |
Prepare the journal entry necessary for Janis to to implement the lower of cost or NRV policy to its 12/31/20 inventory, assuming Janis uses the Allowance method and the existing balance in the Allowance is $300 credit.
Solutions
Expert Solution
| Product | Quantity | Cost per unit | Selling Price | Cost to complete for sale | NRV | Lower of cost or NRV | Inventory cost as per lower of cost or NRV | Current inventory cost |
| A | 900 | 5.1 | 7.25 | 1.9 | 5.35 | 5.1 | 4590 | 4590 |
| B | 1200 | 4.3 | 5.4 | 1.2 | 4.2 | 4.2 | 5040 | 5160 |
| C | 800 | 7.2 | 8 | 0.7 | 7.3 | 7.2 | 5760 | 5760 |
| D | 1000 | 5.75 | 6.2 | 0.55 | 5.65 | 5.65 | 5650 | 5750 |
| E | 700 | 3.6 | 5.2 | 0.8 | 4.4 | 3.6 | 2520 | 2520 |
| F | 800 | 4.8 | 6.25 | 1.1 | 5.15 | 4.8 | 3840 | 3840 |
| G | 900 | 2.9 | 4 | 1.45 | 2.55 | 2.55 | 2295 | 2610 |
| 29695 | 30230 |
| Devaluation of inventory by | 535 |
(30230-29695)
| Entry | Dr | Cr | |
| Loss due to decline to NRV | 235 | 30230-29695-300 | |
| Allowance due to decline to NRV | 235 |
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