Inventory Transactions—Journal Entries
The Hansen Company values its inventory at the lower of FIFO cost or market. The inventory accounts at December 31, 2007, had the following balances.
|
Raw materials |
$ 92,000 |
|
Work in process |
140,510 |
|
Finished goods |
195,350 |
The following are some of the transactions that affected the inventory of the Hansen Company during 2008.
Feb. 10 Hansen Company purchases raw materials at an invoice price of $20,000; terms 3/15, n/30. Hansen
Company values inventory at the net invoice price.
Mar. 15 Hansen Company repossesses an inventory item from a customer who was overdue in making payment.
The unpaid balance on the sale is $220. The repossessed merchandise is to be refinished and placed on sale. It is expected that the item can be sold for $350 after estimated refinishing costs of $90. The normal profit for this item is considered to be $65.
Apr. 1 Refinishing costs of $75 are incurred on the repossessed item.
10 The repossessed item is resold for $350 on account, 30% down.
May 30 A sale on account is made of finished goods that have a list price of $670 and a cost of $410. A reduction of $100 off the list price is granted as a trade in allowance. The trade in item is to be priced to sell at $90 as is. The normal profit on this type of inventory is 25% of the sales price.
Dec. 31 The following information is available to adjust the accounts for the annual statements.
(a) The raw materials inventory account has a cost balance of $105,700. Current market value is $99,700.
(b) The finished goods inventory account has a cost balance of $180,250. Current market value is $195,480.
Instructions: Record this information in journal entry form, including any required adjusting entries at December 31, 2008.