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.
Work in process
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.