Question

On April 1, Robert LLC purchased two units of inventory, A and B. The cost of unit A was $655, and the cost of unit B was $575. On April 30, Robert LLC had not sold the inventory. The net realizable value of unit A was now $675 while the net realizable value of unit B was $505. The adjustment associated with the lower of cost and net realizable value on April 30 will be:

Cost of Goods Sold 70 Inventory 70Inventory 70 Cost of Goods Sold 70Cost of Goods Sold 85 Inventory 85Inventory 85
Cost of Goods Sold 85

Answer 1

Cost of Goods Sold 70 Inventory 70

Step-by-step explanation:

For recording the inventory in the book of accounts, we consider the cost or net realizable value whichever is lower

According to the question, the inventory unit for A would be recorded at $655, and the inventory unit for B would be recorded at $505 as these reflect the lower cost.

The journal entry is shown below:

Cost of goods sold A/c $70 ($575- $505)

To Inventory A/c $70

(Being adjusted entry recorded)