Question

Larkspur Inc. uses a perpetual inventory system. At January 1, 2017, inventory was $213,061,200 at both cost and realizable value. At December 31, 2017, the inventory was $284,378,700 at cost and $267,331,900 at realizable value. 

Prepare the necessary December 31 entry under (a) the cost-of-goods-sold method (b) Loss method. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter for the amounts.) 

Answer 1

(a)

Account Titles	Debit	Credit
Cost of Goods sold	17046800
Inventory		17046800

Under cost of goods sold method, Cost of Goods sold will be increased and inventory will be reduced.

(b)

Account Titles	Debit	Credit
Inventory written down loss	17046800
Inventory		17046800

For Loss method, decrease in value, inventory written down loss account will be debited which will inturn be transferred to profit and loss.