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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Refer to the information provided in RE8-4. If Paul Corporation’s inventory at January 1, 2019, had a cost and net realizable value of $300,000, prepare the journal entry to record the reductions to NRV for Paul Corporation assuming that Paul uses a periodic inventory system and the allowance method.

Paul Corporation uses FIFO and reports the following inventory information:

Chapter 8, Problem 14RE, Refer to the information provided in RE8-4. If Paul Corporations inventory at January 1, 2019, had a

Assuming Paul uses a perpetual inventory system and the direct method, prepare the journal entry to record the write-down of inventory.

To determine

Record the journal entry for reductions to NRV (P uses a periodic inventory system and the allowance method).

Explanation

Periodic Inventory System: It is a system in which the inventory is updated in the accounting records on a periodic basis such as at the end of each month, quarter or year. In other words, it is an accounting method which is used to determine the amount of inventory at the end of each accounting period.

Record the journal entry for reductions to NRV (P uses a periodic inventory and the allowance method).

DateAccount Title and ExplanationPostDebitCredit
Ref.($)($)
2019Income Summary (SE–) 300,000 
       Inventory (A–)  300,000
 (To record the close of beginning inventory)   
     
 Inventory (A+) 312,000 
        Income Summary (SE+)  312,000
...

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