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Unformatted text preview: total inventory basis. 2. Assuming that Keune recognizes inventory write downs using the indirect method, what would be the journal entry that Keune makes to record the loss if there had been no previous write-downs of inventory? 3. Repeat Part #2, but now assume that the balance in the allowance account is $1,000 prior to the 12/31/2010 LCM determination. What would the journal entry be to record the loss? Solution to problem 2: 1. Product Cost Design MKT X 1,000*$10=10,000 1,000*$12 =12,000 Y 600*$14=8,400 600*11.05=6,630 Z 800*15=12,000 800*11=8,800 $30,400 $27,430 LCM 2. Cost Market=30,400-27,430=2,970 Journal entry: Debt: loss due to LCM adjustment 2,970 Credit: Allowance or Inventory 2,970 3. 2,970 required allowance 1,000 balance 1,970 adjustment needed Journal entry: Debt: loss due to LCM adjustment 1,970 Credit: allowance 1,970...
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- Spring '10