On December 31, 2013, the Merchandise Inventories account of the Japanese electronics firm Flower Limited (Flower) had a balance of ¥408,700 million, based on Flower's financial reports for fiscal 2013.Assume that during 2014, Flower purchased merchandise inventories on account for ¥1,456,400 million.On December 31, 2014, it finds that merchandise inventory on hand is ¥412,400 million.Select the correct journal entries to account for all changes in the Inventories during 2014.(Flower applies Japanese accounting standards, and reports its results in millions of yen (¥).In answering this question, assume that Flower uses either U.S.GAAP or IFRS; for purposes of this problem, this choice will not matter.)
A)Cost of Goods Sold ¥1,452,700 million
Merchandise Inventories ¥1,452,700 million
B)Merchandise Inventories ¥1,452,700 million
Cost of Goods Sold ¥1,452,700 million
C)Cost of Goods Sold ¥1,449,000 million
Merchandise Inventories ¥1,449,000 million
D)Merchandise Inventories ¥1,449,000 million
Cost of Goods Sold ¥1,449,000 million
E)none of the above

Question

On December 31, 2013, the Merchandise Inventories account of the Japanese electronics firm Flower Limited (Flower) had a balance of ¥408,700 million, based on Flower's financial reports for fiscal 2013.Assume that during 2014, Flower purchased merchandise inventories on account for ¥1,456,400 million.On December 31, 2014, it finds that merchandise inventory on hand is ¥412,400 million.Select the correct journal entries to account for all changes in the Inventories during 2014.(Flower applies Japanese accounting standards, and reports its results in millions of yen (¥).In answering this question, assume that Flower uses either U.S.GAAP or IFRS; for purposes of this problem, this choice will not matter.)
A)Cost of Goods Sold ¥1,452,700 million 
Merchandise Inventories ¥1,452,700 million
B)Merchandise Inventories ¥1,452,700 million 
Cost of Goods Sold ¥1,452,700 million
C)Cost of Goods Sold ¥1,449,000 million 
Merchandise Inventories ¥1,449,000 million
D)Merchandise Inventories ¥1,449,000 million 
Cost of Goods Sold ¥1,449,000 million
E)none of the above

Quizplus · Accepted Answer

The correct journal entry is:Cost of Goods Sold ¥1,452,700 million Merchandise Inventories ¥1,452,700 millionThis entry records the purchase of merchandise inventories on account for ¥1,456,400 million and the decrease in merchandise inventory on hand by ¥3,700 million (¥412,400 million - ¥408,700 million). The cost of goods sold is calculated as the sum of the beginning inventory, purchases, and ending inventory, less the ending inventory.

On December 31, 2013, the Merchandise Inventories Account of the Japanese