Malone Company determined its ending inventory at cost and at LCNRV at December31, 2019, December 31, 2020, and December 31, 2021, as shown below. Cost LCNRV12/31/2019 $650,000 $650,00012/31/2020 780,000 712,00012/31/2021 905,000 830,000Instructions(a). Prepare the journal entries required at December 31, 2020, and at December 31,2021, assuming that a perpetual inventory system and the cost-of-goods-soldmethod of adjusting to LCNRV is used.(b). Prepare the journal entries required at December 31, 2020, and at December 31,2021, assuming that a perpetual inventory is recorded at cost and reduced toLCNRV using the loss method.

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Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.