eagle resources, which uses the fifo inventory costing method, has the following account balances at…
eagle resources, which uses the fifo inventory costing method, has the following account balances at december 31, 2026, prior to releasing the financial statements for the year: merchandise inventory, ending $16,500 cost of goods sold 67,000 net sales revenue 117,000 eagle resources has determined that the current replacement cost (current market value) of the december 31, 2026, ending merchandise inventory is $13,600 read the requirements. requirement 1. prepare any adjusting journal entry required from the given information (record debits first, then credits. select the explanation on the last line of the journal entry. if no entry is required select \no entry required\ on the first line of the journal entry table.) date accounts and explanation debit credit dec 31
Answer
Explanation:
Step1: Determine the write - down amount
The ending merchandise inventory has a book value of $16,500 and a current replacement cost of $13,600. The write - down amount is $16,500 - $13,600=$2,900.
Step2: Record the adjusting journal entry
We need to debit the Cost of Goods Sold account to increase the cost of goods sold due to the inventory write - down and credit the Merchandise Inventory account to reduce its value to the lower of cost or market.
| Date | Accounts and Explanation | Debit | Credit |
|---|---|---|---|
| Dec 31 | Cost of Goods Sold | $2,900 | |
| Merchandise Inventory | $2,900 | ||
| (To write down merchandise inventory to lower of cost or market) |
Answer:
| Date | Accounts and Explanation | Debit | Credit |
|---|---|---|---|
| Dec 31 | Cost of Goods Sold | $2,900 | |
| Merchandise Inventory | $2,900 | ||
| (To write down merchandise inventory to lower of cost or market) |