Prepare the journal entries required at December 31, 2020, and December 31, 2021, assuming inventory is recorded at LCNRV and a perpetual inventory system using the cost-of-goods-sold method
Blue Company began operations in 2020 and determined its ending inventory at cost and at LCNRV at December 31, 2020, and December 31, 2021. This information is presented below.
|
Cost
|
Net Realizable Value
|
||||
|---|---|---|---|---|---|
|
12/31/20
|
$315,690 | $293,860 | |||
|
12/31/21
|
437,360 | 419,880 |
(a) Prepare the
|
Date
|
Account Titles and Explanation
|
Debit
|
Credit
|
|---|---|---|---|
|
12/31/20
|
enter an account title
|
enter a debit amount
|
enter a credit amount
|
|
enter an account title
|
enter a debit amount
|
enter a credit amount
|
|
|
12/31/21
|
enter an account title
|
enter a debit amount
|
enter a credit amount
|
|
enter an account title
|
enter a debit amount
|
enter a credit amount
|
(b) Prepare journal entries required at December 31, 2020, and December 31, 2021, assuming inventory is recorded at LCNRV and a perpetual system using the loss method. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)
|
Date
|
Account Titles and Explanation
|
Debit
|
Credit
|
|---|---|---|---|
|
12/31/20
|
enter an account title
|
enter a debit amount
|
enter a credit amount
|
|
enter an account title
|
enter a debit amount
|
enter a credit amount
|
|
|
12/31/21
|
enter an account title
|
enter a debit amount
|
enter a credit amount
|
|
enter an account title
|
enter a debit amount
|
enter a credit amount
|
(c) Which of the two methods above provides the higher net income in each year?
|
choose a method that provides the higher net income in each year
Both methods have the same effectCost-of-goods-sold methodLoss method
|
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