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

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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 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. (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
 


(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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