Question

Bluebell Company sells blue jeans. Last year, bell-bottom jeans were fashionable; this year, boot cut jeans are in style. The company has 375 units of bell-bottom jeans with a cost of $17 per unit and a market value of $15 per unit. The inventory also includes 1,000 units of boot cut jeans with a cost of $16 per unit and a market value of $19 per unit.

Required:

Part a Explain whether this situation requires an adjustment to the accounting records.

Part b Prepare the journal entry, if any, that is required to adjust the Inventory account.

Answer

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