Business, 07.04.2020 00:09 bloodry

In 2021, Adonis Industries changed its method of valuing inventory from the average cost method to the FIFO method. At December 31, 2020, Adonis’s inventories were $47.2 million (average cost). Adonis’s records indicated that the inventories would have totaled $63.2 million at December 31, 2020, if determined on a FIFO basis.
Ignoring income taxes, what journal entry will Adonis use to record the adjustment in 2021?

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Answer from: nova97

Retained earnings under the Balance sheet

Explanation:

Making comparisons between the two inventory value when using FIFO or Average cost method=

63.0M - 47.1M = $15.9M

We see an increase in the ending inventory.

Thus, this increase in income has been unprecedented, and may not have been distributed to the shareholders of Adonis Industries. On the balance sheet journal entry this extra income would be indicted on the balance sheet on the retained earnings column for year 2021.

Answer from: sofigaviria05

$16 million is inputed on credit side of adjustment journal

Explanation:

Firstly, let us compare the FIFO method and the average cost method

Using FIFO method, we assign the cost of first acquired items to sales, while we assign the value of the closing stock to include the cost of recently acquired items.

In average cost method, the inventories have prices which are at the average of all available inventories. Average cost is obtained by dividing is total cost of goods available for sale by total units available for sale.

We proceed to calculate inventory value:

It is given that the average cost of inventory is $47.2million and inventory cost at book is $63.2million.

inventory value = Average cost of inventory value - Inventory cost at book = $47.2 - $63.2 millions = $16 million

We now proceed to the adjustment journal.

To fill the adjustment journal, we take note of the following;

Inventory is an asset. There is an increase in asset value. Therefore, it is debited.

Since Retained earnings are liability. There is an increase in liability value. Therefore, it is credited.

This means we put a value of $16 million on the credit side of the adjustment journal

Answer from: Quest

Secured loans are protected by collateral security. examples: title loans where the borrower uses the car title as collateral security interest rates are lower and repayments are longer therefore risk is low as a collateral security is given as guarantee to the bank in case of failure to pay the loanunsecured loans are not protected by collateral security but it is given on the creditworthiness of the borrower, trusting that she/he will pay on time. examples; payday loans is a short term loan where the borrower lends money from the bank and pays is back when the borrower receives his/her wages.interest rates are high and repayments are shorter. but the risk is high as no collateral security is given as a guarantee to the bank for payment of the loan

Answer from: Quest

Iam pretty sure it's d hope this

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