Littleton Books has the following transactions during May.

May 2	Purchases books on account from Readers Wholesale for $3,300, terms 1/10, n/30.
May 3	Pays cash for freight costs of $200 on books purchased from Readers.
May 5	Returns books with a cost of $400 to Readers because part of the order is incorrect.
May 10	Pays the full amount due to Readers.
May 30	Sells all books purchased on May 2 (less those returned on May 5) for $4,000 on account.

• Record purchase of books on account from Readers Wholesale for $3,300, terms 1/10, n/30.

Date	General Journal	Debit	Credit
May 02	Inventory	3,300
	Accounts Payable		3,300

• Record payment of cash for freight costs of $200 on books purchased from Readers.

Date	General Journal	Debit	Credit
May 03	Inventory	200
	Cash		200

• Record the return of books with a cost of $400 to Readers because part of the order is incorrect.

Date	General Journal	Debit	Credit
May 05	Accounts Payable	400
	Inventory		400

• Record payment of the full amount due to Readers.

Date	General Journal	Debit	Credit
May 10	Accounts Payable
	Cash
	Inventory

• Record the sale of all book inventory purchased on May 2 (less those returned on May 5) for $4,000 on account.

Date	General Journal	Debit	Credit
May 30	Accounts Receivable	4,000
	Sales Revenue		4,000

• Record cost of inventory sold.

Date	General Journal	Debit	Credit
May 30	Cost of Goods Sold
	Inventory

2. Assume that payment to Readers is made on May 24 instead of May 10. Record this payment.

• Record payment of the full amount due to Readers.

Date	General Journal	Debit	Credit
May 24	Accounts Payable
	Cash

A company like Golf USA that sells golf-related inventory typically will have inventory items such as golf clothing and golf equipment. As technology advances the design and performance of the next generation of drivers, the older models become less marketable and therefore decline in value. Suppose that in the current year, Ping (a manufacturer of golf clubs) introduces the MegaDriver II, the new and improved version of the MegaDriver. Below are year-end amounts related to Golf USAs inventory.

Inventory	Quantity	Unit Cost	Unit NRV
Shirts	35	$ 60	$ 70
MegaDriver	15	360	250
MegaDriver II	30	350	420

Required:

1. Calculate the total recorded cost of ending inventory before any adjustments.

Cost of ending inventory (before adjustment)

3. Record any necessary adjusting entry to inventory.

Transaction	General Journal	Debit	Credit
1

4. Determine the impact of the adjusting entry in the financial statements. (Amounts to be deducted should be entered with minus sign.)

Income Statement:
Revenues			Expenses		=	Net Income
Balance Sheet:
Assets		=	Liabilities		+	Stockholders Equity