Reference no: EM133166227

Question - Part A - Firm A operates a periodic inventory system. On 1 January 2020, the inventory account had a balance of 700,000. At the end of 2020, the firm conducted a physical count of its inventory and found that the inventory value was 600,000.

We also know the following information.

1. On December 25th, 2020, firm A purchased 300,000 inventories. On the terms of the FOB shipping point, the seller shipped out the inventory on December 27th, 2020. Firm A received the inventory on January 5th, 2021. Firm A already recorded the purchasing transaction.

2. On December 28th, 2020, firm A made a sale transaction of 200,000. The cost of the goods sold is 150,000. The customer paid in cash. Firm A shipped out the inventory to the customer on December 30th, 2020, on the term of FOB destination. The customer received the goods on January 2nd, 2021. Firm A hasn't made any journal entries related to this sale transaction.

3. There are 50,000 inventories on consignment from Firm B.

Required -

What is the ending inventory balance at the end of 2020? Please show the calculation process.

Suppose that the purchase account has a balance of 600,000 at the end of 2020. What should be the cost of goods sold for 2020? Please show the calculation process.

Part B - Firm B paid 500,000 cash for some inventories at the beginning of 2020. The original cost of these inventories is 500,000. Firm B was not able to sell these inventories in 2020. At the end of 2020, the net realizable value is 450,000. Firm B still held these inventories at the end of 2021. The net realizable value of these inventories increased to 550,000 at the end of 2021.

Please provide all the journal entries related to these inventories for 2020 and 2021.

What principle is applied for the recognition of inventory write-down expense in 2020?