Question

What is the journal entry for the following question?

ABC uses a periodic inventory system, and the ending inventory for each year is determined by taking a complete
physical inventory at year-end. A physical count was taken on December 31, 2016, and the inventory on-hand at
that time totaled $70,000, which reflects historical cost. Record the adjusting entry for properly recognizing
2016 Cost of Goods Sold. Hint: This was the first year of operations, so beginning inventory balance is zero.
Additionally, ABC adheres to GAAP by recording ending inventory at the lower of cost and net realizable value at a total inventory level.
A review of inventory data further indicated that the current retail sales value of the ending inventory is $60,000 and estimated costs of
completion and shipping is 10% of retail. Be sure to make an additional adjustment, if necessary, to properly value ending inventory
using the Loss and Allowance methodology. For Income Statement presentation purposes, be sure to use the Loss Method for accounting
for adjustments of inventory to market value.

Answer 1

1 Mechandise Inventory Purchase amid the year $2,47,000

Less: Ending Inventory (according to physical verification) (55,000)

Cost of merchandise sold 1,92,000

Modifying diary section

Charge $ Crredit $

Cost of Goods sold 1,92,000

Inventory 55,000

Stock purchases 2,47,000

Deals Revenue xxxx

Cost of Goods sold 1,92,000

To Gross Income ($ xxxx-$ 192,000) xxxx

2 Market Value of inventory 50,000

Less: Cost of fruition and transportation ($ 50,000 x 15%) (7,500)

Net Realizable Value of inventory 42,500

Cost of Inventory 55,000

Stock cost discounted ($ 55,000 - $ 425,000) 12,500

Note: Here it is expected that the diminishment in thevalue of stock, $ 12,500 being charged to cost of merchandise sold bypassig the accompanying change passage

Altering diary section

Charge $ Crredit $

Cost of Goods sold ($ 192,000 + $ 12,500) 2,04,500

Inventory 42,500

Stock purchases 2,47,000

Deals Revenue xxxx

Cost of Goods sold ($ 192,000 + $ 12,500) 2,04,500

To Gross Income ($ xxxx-$ 204,500) xxxx