A company reports merchandise inventory on December 31 at $250,000 but LCM applied to items is $200,000. Record the journal entry to report merchandise inventory at the correct amount

Solution:

In order to record the merchandise inventory on LCM with the correct amount, the following Journal entry will be passed in the books of account:

Date account and explanation debit credit

Dec 31 The cost of goods sold (250000-200000) 50000

Merchandise inventory 50000

(To record inventory on LCM)

Therefore, the cost of goods sold will be debited with an amount of $50000 and the Merchandise inventory will be credited with the same amount of $50000.