Question

Bower Consulting Company started the period with cash of $25,000, 500 units of inventory with a cost of $20,000 (uses FIFO) , common stock of $20,000 and retained earnings of $25,000. Bower engaged in the following transactions in 2013:
Transactions during 2013
Purchased with cash 50 units of inventory for $2,500
Purchased on account 250 units of inventory for $14,000
Sold 750 units of inventory for $112,500. This was a cash sale
Sold 10 units of inventory for $1,500. This was a cash sale
Made a partial refund for 8 units to the customer who purchased the 10 units in the transaction above.
Information for Adjusting Entries
Bower carries only one type of inventory item. At year end the market value of each unit of inventory was $45 per unit.
Re-evaluate the value of the ending inventory and prepare the necessary journal entry, assuming Bower applies the lower of cost or market rule to individual items

PLEASE HELP WITH JOURNAL ENTRIES

Answer 1

Debit | Credit $2,500 $2,500 $14,000 $14,000 $112,500 $112,500 $33,700 $33,700 Journal entries: Accounts Inventory Cash (To record purchase of 50 units inventory for cash) Inventory Accounts payable (To record purchase of 250 units inventory on account) Cash Sales (To record cash sale of 750 units) Cost of goods sold Inventory (To record Cost of goods sold for above sale) Cash Sales (To record cash sale of 10 units) Cost of goods sold Inventory (To record Cost of goods sold for above sale) Sales returns and allowances ((1500 / 10)*8] Cash (To record partial refund of 8 units to customer) Inventory Cost of goods sold (To record effect of partial refund in inventory) $1,500 $1,500 $560 $560 $1,200 $1,200 $448

Cost of ending Inventory: FIFO Purchases Sales Unit Cost Total Units Unit Cost $40 $20,000 $50 $2,500 Units 500 50 Beginning Inventory Purchase Balance Total Units Unit Cost 500 $40 500 $40 50 $50 Total $20,000 (Unit Cost = Total - Units] $20,000 $2,500 $20,000 $2,500 $14,000 $2,800 Purchase 250 $56 $14,000 500 $40 50 250 50 $50 $56 $56 Sale 500 50 200 10 $40 $50 $56 $56 $20,000 $2,500 $11,200 $560 Sale Sales return 40 48 $56 $56 $2,240 $2,688 8 $56 $448 Value of ending inventory is lower of cost or market value is $2,160. Cost Market Value Difference Units 48 48 Per unit $56 $45 Total $2,688 $2,160 $528

Debit Credit $528) Journal entry: Accounts Cost of goods sold Inventory (To record revaluation of ending inventory to market value) $528