Diaz Fresh discloses the following annual data. For Year Ended December 31 2020 2021 Sales revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $160,000 $240,000 Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000 120,000 Its cost of goods sold is based on inventories valued at cost. Assume for each year that all of the beginning inven- tory is sold by year end. Additional information regarding its inventories follows. Inventory LIFO Cost Market January 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,000 $16,000 December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 18,000 December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,000 20,000 Required a. Prepare the entries to apply the lower-of-cost-or-market rule at December 31, 2020, and 2021. Use an allow- ance account to reduce inventory and a loss account to decrease equity Remaining expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000 70,000 b. Prepare the entries to apply the lower-of-cost-or-market rule at December 31, for 2020, and 2021. Use an allowance account to reduce inventory and adjust cost of goods sold to decrease equity.
Diaz Fresh discloses the following annual data.
For Year Ended December 31 2020 2021
Sales revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $160,000 $240,000
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000 120,000
Its cost of goods sold is based on inventories valued at cost. Assume for each year that all of the beginning inven-
tory is sold by year end. Additional information regarding its inventories follows.
Inventory LIFO Cost Market
January 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,000 $16,000
December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 18,000
December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,000 20,000
Required
a. Prepare the entries to apply the lower-of-cost-or-market rule at December 31, 2020, and 2021. Use an allow-
ance account to reduce inventory and a loss account to decrease equity
Remaining expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000 70,000
b. Prepare the entries to apply the lower-of-cost-or-market rule at December 31, for 2020, and 2021. Use an
allowance account to reduce inventory and adjust cost of goods sold to decrease equity.
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