Question

Archer Manufacturing had sales for the week of $3,653?, of which $3,000 was on credit and$653

in cash sales. The cost of the merchandise sold was $1,805.

The journal entries would include? a:

A.

debit to Cash for

3,653?,

credit to Sales for

$3,653.

B.

debit to Cost of Goods Sold for

$1,805?;

credit to Inventory for

$1,805.

C.

debit to Cash for

$3,653

and a credit to Cost of Goods Sold for

$3,653.

D.

debit to Cost of Goods Sold for $1,805?;

credit to Sales of

$1,805.

?S&C Inc. has the following LIFO perpetual inventory? records:

Date	Purchases	Cost of Goods Sold	Inventory on Hand
December 1			$3,500
December 7	$1,300		$4,800
December 18		$1,100	$3,700
December 31	$200		$3,900

The current replacement cost of the ending inventory is

$2,500.

To apply the? lower-of-cost-or-market rule, the journal entry would? be:

A.

debit Invento $1,100?,

credit Cost of Goods Sold $ $1,100

B.

debit Cost of Goods Sold

$1,400?,

credit Inventory$1,400

C.

debit Cost of Goods Sold

$1,100?,

credit Inventory$1,100

D.

debit Inventory

$1,400?,

credit Cost of Goods Sold $1,400

Answer 1

Solution:

Problem 1 -- Archer Manufacturing

The correct option is B.

Debit to Cost of Goods Sold for $1,805?

Credit to Inventory for $1,805

Problem 2 – S&C Inc

Lower of Cost or Market Value in a method of inventory valuation. As per this method inventories are reported at cost or market value whichever is lower.

Since market value is not given in the question, we have taken replacement cost as market value.

Cost of Inventory = $3,900

Market Value = $2,500

It means to record the entry at lower of cost or market value, we need to credit inventory account by $1,400 and debit the cost of goods sold account.

Hence, the correct entry is B. debit Cost of Goods Sold $1,400?, credit Inventory$1,400

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