Asked Mar 27, 2019

Pearl Inc. uses LIFO inventory costing. At January 1, 2017, inventory was $214,532 at both cost and market value. At December 31, 2017, the inventory was $289,964 at cost and $262,440 at market value.

Prepare the necessary December 31 entry under (a) the cost-of-goods-sold method (b) Loss method. 

Expert Answer

Step 1

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

  • Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
  • Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.
Step 2

Journal entry on December 31 under cost of goods sold method:

Working Note 1:



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