Question

Check my wor Olson Metrics Ltd. has been the dominant firm in its field. The company's most popular product has been the Model T, which carries a retail price of $390. The Model T costs $290 per unit to produce. Recently, the company introduced a new version, Model A, priced at $420. When the Model A was released, Olson reduced the retail price of the remaining 1,000 units of Model T to $340. Despite the price reduction, the demand for the Model T dropped sharply. Therefore, Olson decided to sell 600 of the remaining units on consignment through Floor Mart Inc. as a private label product at $260 per unit. Floor Mart will collect a commission of 20% per unit. Olsen will lower the price of the remaining 400 units in Inventory to $320. Required: Prepare any journal entry(ies) that are necessary to record the effects of the above informatich. (If no entry is required for a transaction/event, select "No Journal entry required in the first account field.) View transaction list Journal entry worksheet Record the writedown of inventory Note Enter debits before credits. Debit General Journal Transaction Credit < Prey 4 of 7 Next >

Answer 1

Notes:

1. Retail price of model T =$390
2. Cost=$290
3. Profit=$10
4. Fall of demand caused them to sell 600 units at 260 and remaining inventory at 260 <than cost

Journal entries

Bank Dr.(600*260). 156,000

Loss. Dr(600*130). 78,000

Commission {(600*260)*20%}. 31,200

To, Model T. 265,200

(Sold model T at a loss $130 per unit)

Inventory (400*320) Dr 128,000

Loss (400*20) Dr 8,000

To inventory (400*340). 136,000

( Abnormal invetory redefined with new rate)