**Case Study: XYZ Furniture Company - Inventory Valuation and Journal Entry Challenges**

**Introduction:** XYZ Furniture Company is a well-established manufacturer and retailer specializing in high-quality furniture. As the company expanded its product lines and entered new markets, it faced challenges related to inventory valuation and accurate journal entries.

**Background:** With a diverse range of furniture products, XYZ Furniture Company encountered difficulties in determining the most appropriate method for inventory valuation. The company had been using the Average Cost method, but concerns arose regarding its accuracy in reflecting the true value of inventory, especially for unique and high-value items.

**Inventory Valuation Challenges:** XYZ Furniture Company's inventory included both standard items with consistent costs and custom-designed pieces with varying production expenses. The complexity of the product mix made it challenging to determine a uniform valuation method that accurately represented the economic realities of each item.

**Audit Discovery:** During a routine audit, external auditors identified discrepancies in the valuation of certain inventory items. This led to a deeper investigation, uncovering instances where the Average Cost method did not appropriately capture the fluctuating costs associated with custom-designed furniture.

**Recommendations:** In response to the audit findings, the auditors recommended a shift to the Specific Identification method for inventory valuation. This method allows the company to assign specific costs to individual items, providing a more accurate representation of the actual value of each unit.

**Implementation of Specific Identification:** XYZ Furniture Company decided to adopt the Specific Identification method for inventory valuation. The finance and accounting teams underwent training to ensure a smooth transition, and the necessary systems and processes were updated to accommodate the new method.

**Journal Entry Challenges:** The switch to the Specific Identification method posed challenges in terms of journal entries. Allocating specific costs to each inventory item required a more detailed and meticulous approach to recording transactions, and the company had to ensure compliance with accounting standards.

**Table Format Journal Entry Question:**

| Date | Account | Debit ($) | Credit ($) | |------------|---------------------------|------------|------------| | 01/01/2023 | Inventory | ? | ? | | 01/01/2023 | Cost of Goods Sold | ? | ? |

**Question:** Based on the implementation of the Specific Identification method, complete the journal entries for the purchase of custom-designed furniture on January 1, 2023. Assume the company purchased 10 custom-designed items at varying costs. Provide the appropriate amounts for the Debit and Credit columns.

Please justify your entries in the context of the case study.