Dover Company began operations in 2015 and determined its ending inventory at cost and at a LCNRV at December 31, 2015, and December 31, 2016. This information is presented below. Cost Net Realizable Value 12/31/15 £520,000 £485,000 12/31/16 615,000 585,000 Instructions (a) Prepare the journal entries required at December 31, 2015, and December 31, 2016, assuming that the inventory is recorded at LCNRV, using a perpetual inventory system and the cost-of-goods-sold method. (b) Prepare the journal entries required at December 31, 2015, and December 31, 2016, assuming that the inventory is recorded at cost, using a perpetual system and the loss method. (c) Which of the two methods above provides the higher net income in each year?
Dover Company began operations in 2015 and determined its ending inventory at cost and at a
LCNRV at December 31, 2015, and December 31, 2016. This information is presented below.
Cost Net Realizable Value
12/31/15 £520,000 £485,000
12/31/16 615,000 585,000
Instructions
(a) Prepare the
assuming that the inventory is recorded at LCNRV, using a perpetual inventory system
and the cost-of-goods-sold method.
(b) Prepare the journal entries required at December 31, 2015, and December 31, 2016,
assuming that the inventory is recorded at cost, using a perpetual system and the loss
method.
(c) Which of the two methods above provides the higher net income in each year?
(d) Explain the difference between the cost-of-goods-sold method and the loss method.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 1 images
