Question

Johnson Department Store uses the perpetual inventory system and has ending inventory with a historical cost of . The current replacement cost of the inventory is . The net realizable value is . The company uses LIFO. Before any adjustments at the end of the​ period, the cost of goods sold account has a balance of . Which journal entry is required under U.S.​ GAAP?

Answer 1

Based on the information given about Johnson Department Store the appropriate journal entry that  is required under U.S. GAAP is:

A. debit Cost of Goods sold for $22000 and credit inventory for $22000.

Since the ending inventory with a historical cost is $620,000 and the current replacement cost of the inventory is $598,000 which means that the inventory amount will be $22,000.

Johnson Department Store Journal entry

Debit Cost of Goods sold $22,000

Credit inventory  $22,000

($620,000-$598,000)

(To record Cost of goods sold )

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