Plant Company began operations in 2016 and determined its ending inventory at co
ID: 2565224 • Letter: P
Question
Plant Company began operations in 2016 and determined its ending inventory at cost and at lower-of-LIFO-cost-or-market at December 31, 2016, and December 31, 2017. This information is presented below.
Prepare the journal entries assuming that the inventory is recorded at market, and a perpetual inventory system (cost-of-goods-sold method) is used.
12/31/16
12/31/17
12/31/18
Cost Lower of cost or Market December 31, 2016 $87,000 $71,000 December 31, 2017 $100,000 $98,000 December 31, 2018 $97,000 $97,000Explanation / Answer
Plant Company
Journal Entries assuming that the inventory is recorded at market, and a perpetual inventory system (cost-of-goods-sold method) is used:
Date
Account Titles and Explanation
Debit
Credit
31-Dec-16
Cost of Goods Sold
$16,000
Inventory
$16,000
31-Dec-17
Cost of Goods Sold
$2,000
Inventory
$2,000
The cost and lower of cost or market for the year ended December 31, 2018 are same at $97,000. Hence, no adjustment is needed.
Date
Account Titles and Explanation
Debit
Credit
31-Dec-16
Cost of Goods Sold
$16,000
Inventory
$16,000
31-Dec-17
Cost of Goods Sold
$2,000
Inventory
$2,000