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The inventories of Berry Company for Year 2 and Year 3 are as follows: Cost NRV January 1, Year 2 $10,000 $10,000 December 31, Year 2 13,000 11,500 December 31, Year 3 15,000 14,000

The inventories of Berry Company for Year 2 and Year 3 are as follows: Cost NRV January 1, Year 2 $10,000 $10,000 December 31, Year 2 13,000 11,500 December 31, Year 3 15,000 14,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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The inventories of Berry Company for Year 2 and Year 3 are as follows: Cost NRV January 1, Year 2 $10,000 $10,000 December 31, Year 2 13,000 11,500 December 31, Year 3 15,000 14,000 Berry uses the periodic inventory method and the FIFO inventory cost flow assumption. Purchases in Year 2 and Year 3 were $200,000 and $275,000, respectively. Required: 1. Assume the inventory that existed at the end of Year 2 was sold in Year 3. Prepare the necessary journal entries at the end of each year to record the correct inventory valuation if Berry uses the: a. direct method b. allowance method 2. Next Level Consider the differences between the direct method and the allowance method with regard to inventory valuation and income. How does the use of a periodic or perpetual inventory system affect the valuation of inventory?
Transcribed Image Text:The inventories of Berry Company for Year 2 and Year 3 are as follows: Cost NRV January 1, Year 2 $10,000 $10,000 December 31, Year 2 13,000 11,500 December 31, Year 3 15,000 14,000 Berry uses the periodic inventory method and the FIFO inventory cost flow assumption. Purchases in Year 2 and Year 3 were $200,000 and $275,000, respectively. Required: 1. Assume the inventory that existed at the end of Year 2 was sold in Year 3. Prepare the necessary journal entries at the end of each year to record the correct inventory valuation if Berry uses the: a. direct method b. allowance method 2. Next Level Consider the differences between the direct method and the allowance method with regard to inventory valuation and income. How does the use of a periodic or perpetual inventory system affect the valuation of inventory?
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