Question

*Exercise 9-05 Presented below is information related to Sheffield Enterprises. Jan. 31 $17,550 16,965 Inventory at cost Inventory at LCNRV Purchases for the month Sales for the month Feb. 28 $17,667 14,742 19,890 33,930 Mar. 31 $19,890 18,252 28,080 40,950 Apr. 30 $ 16,380 15,561 31,005 46,800 From the information, prepare (as far as the data permit) monthly income statements in columnar form for February, March, and April. The inventory is to be shown in the statement at cost; the gain or loss due to market fluctuations is to be shown separately (using a valuation account). (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) February March April UY04 04044 4 Prepare the journal entry required to establish the valuation account at January 31 and entries to adjust it monthly thereafter. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry for the account titles and enter o for the amounts.) Date Account Titles and Explanation Debit Credit

Answer 1

Ans.(A)

	FEBRUARY	MARCH	APRIL
Sales	$33,930	$40,950	$86,800
Cost of goods sold
Inventory, beginning	$17,550	$17,667	$19,890
Add:-Purchases	$19,890	$28,080	$31,005
Cost of Goods available	$37,440	$45,747	$50,895
Less:- Inventory, ending	$17,667	$19,980	$16,380
Cost of Goods sold	$19,773	$25,767	$34,515
Gross profit	$14,157	$15,183	$52,285
Gain (loss) due to market fluctuations of inventory	($2,340)	$1,287	$819
	$11,817	$13,896	$51,466

	JAN-31	FEB-28	MAR-31	APR-30
Inventory Cost	$17,550	$17,667	$19,890	$16,380
Inventory at LCNRV	($16,965)	($14,742)	($18,252)	($15,561)
Allowance amount needed to reduce inventory to NRV	$585	$2,925	$1,638	$819
Gain (loss) due to market fluctuations of inventory		($2,340)	$1,287	$819

(B)

DATE	ACCOUNT TITLES & EXPLANATION	DEBIT	CREDIT
Jan-31	Loss due to decline of inventory to NRV	$585
	To Allowance to reduce inventory to NRV		$585
Feb-28	Loss due to decline of inventory to NRV	$2,340
	To Allowance to reduce inventory to NRV		$2,340
Mar-31	Allowance to reduce inventory to NRV	$1,287
	To Recovery of inventory loss		$1,287
Apr-30	Allowance to reduce inventory to NRV	$819
	To Recovery of inventory loss		$819