Question

A company reports merchandise inventory on December 31 at $250,000 but LCM applied to items is $200,000.Record the journal entry to report merchandise inventory at the correct amount

Answer 1

Solution:

In order to record the merchandise inventory on LCM with the correct amount, the following Journal entry will be passed in the books of account:

Date account and explanation                               debit      credit

Dec 31 The cost of goods sold (250000-200000)     50000  

Merchandise inventory                                                      50000

(To record inventory on LCM)  

Therefore, the cost of goods sold will be debited with an amount of $50000 and the Merchandise inventory will be credited with the same amount of $50000.