XYZ has the following balances as of 12/31/02:
Accounts receivable, net of $2,500
allowance for doubtful accounts
Marketable securities, at fair value, cost of
The following applies to the month ended January 31, 2003 (XYZ uses perpetual
inventory purchases for the month of $450,000, on credit, terms
2/10 net 30, XYZ uses the gross method
Sell goods to customers for $750,000 (no discounts offered).
inventory system indicates that the cost of the goods sold was $500,000.
Combined collections from customers of $560,000 of accounts receivable
Management concludes that an adjustment to lower the cost of inventory to
market is required; the adjustment required is $20,000.