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29 May, 06:51

A company's current inventory consists of 5,000 units purchased at $6 per unit. Replacement cost has now fallen to $5 per unit. What is the entry the company must record to adjust inventory to market?

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  1. 29 May, 08:04
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    Inventory write off = $5,000 Debit

    Inventory = $5,000 Credit

    Explanation:

    given data

    current inventory = 5,000 units

    purchased = $6 per unit

    Replacement cost = $5 per unit

    solution

    As here we know replacement cost fallen to $5 per unit which is lower than the cost of $6

    so that amount realized from the sale of a unit is $5 so

    so total adjustment required is

    total adjustment required = ($6 - $5) * 5000

    total adjustment required = $5,000

    so that

    Entry required to write down inventory to its realizable value as

    Inventory write off = $5,000 Debit

    Inventory = $5,000 Credit
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Home » Business » A company's current inventory consists of 5,000 units purchased at $6 per unit. Replacement cost has now fallen to $5 per unit. What is the entry the company must record to adjust inventory to market?
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