Question

At the end of the year, Bryce Company's accounting records showed that they had 175 items in stock at a FIFO cost of $15 each. These normally sell for $20 each. Due to increased competition, these items can now be sold for only $10 each. What is the amount of an adjustment, if any, that must be made to the value of the inventory at year-end?

Answer 1

The adjustment that must be made to the value of the inventory at year-end is $875.

Step-by-step explanation:

The amount of adjustment that must be made to the value of the inventory at year-end can be calculated by comparing the original cost of the inventory with the new selling price. In this case, the original cost per item is $15 and the new selling price is $10. The adjustment can be calculated by subtracting the new selling price from the original cost and multiplying it by the number of items in stock.

Adjustment = (Original Cost - New Selling Price) * Number of Items

Using the given information:

Adjustment = ($15 - $10) * 175

Adjustment = $875

Therefore, an adjustment of $875 must be made to the value of the inventory at year-end.