Financial Accounting

Question

What is the journal entries for the following:

On 31 August 2019 Sunshine shop identified that inventory costing 43 500 had been damaged. This inventory could be sold for 46000 if 5 000 was spent on repairs. The necessary journal entry was processed.

Answer 1

If the inventory was repaired and sold the journal entry would be

Increase in repair expense and decrease in cash for the payment.

Inventory 5,000

Cash 5,000

When sold, you will have two entries:

1 to record the sale payment

Cash 46,000

Sales Revenue 46,000

2 to record the sale of inventory

Cost of Goods Sold 48,500

Inventory 48,500

Inventory is now worth 48,500 (43,500 + 5,000 of repairs capitalized)