Due to a nationwide recession, Amesbury Systems’ merchandise inventory is gathering dust. It is now October 31, 2014, and the $163,300 that Amesbury Systems paid for its ending inventory is $18,500 higher than current replacement cost. Before any adjustments at the end of the period, Amesbury Systems’ Cost of Goods Sold account has a balance of $695,000. Amesbury Systems uses lower of cost or net realizable value to value its ending inventory.
Requirements
1. What amount should Amesbury Systems report for inventory on the balance sheet?
2. What amount should Amesbury Systems report for cost of goods sold?
3. Journalize any required entries.