Question
Account Debit Credit Cash $ 177,382 Accounts Receivable 604,621 Allowance for Doubtful Accounts $ 9,216 Inventory 323,810 Prepaid Advertising 238,032 Land 162,375 Buildings 894,600 Accumulated
Account | Debit | Credit |
Cash | $ 177,382 |
|
Accounts Receivable | 604,621 |
|
Allowance for Doubtful Accounts |
| $ 9,216 |
Inventory | 323,810 |
|
Prepaid Advertising | 238,032 |
|
Land | 162,375 |
|
Buildings | 894,600 |
|
Accumulated Depreciation Buildings |
| 293,940 |
Construction in Progress | 632,000 |
|
Equipment | 576,059 |
|
Accumulated Depreciation Equipment |
| 209,476 |
Notes Receivable | 36,972 |
|
Discount on Notes Receivable |
| 7,622 |
Accounts Payable |
| 391,037 |
Notes Payable |
| 784,165 |
Common Stock ($1 par) |
| 192,500 |
Retained Earnings |
| 683,219 |
Dividends | 104,260 |
|
Sales Revenue |
| 5,697,316 |
Sales Returns | 219,622 |
|
Cost of Goods Sold | 3,052,539 |
|
Insurance Expense | 226,154 |
|
Interest Expense | 24,156 |
|
Legal Expense | 85,720 |
|
Salaries and Wages Expense | 746,372 |
|
Utilities Expense | 163,817 |
|
| $8,268,491 | $8,268,491 |
Reed uses the dollar-value LIFO cost method for inventory reporting purposes. Reed adopted this method on December 31, 2019. The following information pertains to the companys inventory at year-ends 2019 and 2020:
Date | Inventory at Year-End Prices | Relevant Price Index |
December 31, 2019 | $271,296 | 100 |
December 31, 2020 | $323,810 | 109 |
Reed uses perpetual FIFO for day-to-day bookkeeping purposes and then converts its accounts to the dollar-value LIFO cost method at reporting dates. Give the FIFO-to-LIFO conversion entry required at December 31, 2020. (Assume there was no difference in the FIFO and LIFO amounts at year-end 2019.)
Once the company determines the Inventory balance under the new method (LIFO), it must consider the need for an inventory write-down. Reed applies the write-down procedure to the inventory as a whole. Information concerning the companys December 31, 2020 inventory follows:
Net realizable value | 292,760 |
Normal profit margin | 23,495 |
Replacement cost | 323,810 |
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