Question: Some of P and Y Electronics merchandise is gathering dust

Some of P and Y Electronics’ merchandise is gathering dust. It is now December 31, 2015, and the current replacement cost of the ending merchandise inventory is $ 30,000 below the business’s cost of the goods, which was $ 95,000. Before any adjustments at the end of the period, the company’s Cost of Goods Sold account has a balance of $ 415,000.

1. Journalize any required entries.
2. At what amount should the company report merchandise inventory on the ­balance sheet?
3. At what amount should the company report cost of goods sold on the income statement?
4. Which accounting principle or concept is most relevant to this situation?

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  • CreatedJanuary 16, 2015
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