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6 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
| 6 | 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, 2021, and the inventory on-hand at | |||||||||
| that time totaled $50,000, which reflects historical cost. Record the adjusting entry for properly recognizing | |||||||||
| 2021 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 $45,000 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. | |||||||||
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