During the 2013 audit of Namtip Ltd.

During the 2013 audit of Namtip Ltd. you have tested the internal controls over inventory, observed the physical inventory taken on December 31, 2013, and performed various follow-up procedures related to the physical. Now you are performing costing (pricing) tests on a sample of the ending inventory. One of the items you selected for cost (price) testing is orange widget, a significant part in the manufacture of Namtip’s main products. You noted that the 12/31/13 inventory record of orange widgets consisted of 1,263 units (you previously verified that this agreed to the quantity indicated from the physical inventory) at $782 each for a total of $987,666. Assume you determined that the net realizable value for the orange widgets is $775 per unit, while the net realizable value less a normal margin is $745 per unit. Prepare the adjusting entry, in proper form without an explanation, for the proper presentation of orange widgets at December 31, 2013 assuming you examined a vendor invoice dated January 3, 2014 for 500 orange widgets at $750 each for a total of $375,000. The units were ordered on January 2, 2014 and received on January 6, 2014.