The following are the inventories for the years 2016, 2017, and 2018 for Parry Company: Cost Market January 1, 2016 $50,000 $50,000 December 31, 2016 64,000 60,000 December 31, 2017 71,000 70,000 December 31, 2018 75,000 78,000 Required: 1. Assume the inventory that existed at the end of each year was sold in the subsequent year. Prepare journal entries to record the lower of cost or market for each of the following alternatives. a. allowance method, perpetual inventory system b. direct method, perpetual inventory system 2. Next Level Explain any differences in inventory valuation and income between the two methods.
The following are the inventories for the years 2016, 2017, and 2018 for Parry Company: Cost Market January 1, 2016 $50,000 $50,000 December 31, 2016 64,000 60,000 December 31, 2017 71,000 70,000 December 31, 2018 75,000 78,000 Required: 1. Assume the inventory that existed at the end of each year was sold in the subsequent year. Prepare journal entries to record the lower of cost or market for each of the following alternatives. a. allowance method, perpetual inventory system b. direct method, perpetual inventory system 2. Next Level Explain any differences in inventory valuation and income between the two methods.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter7: Inventories: Cost Measurement And Flow Assumptions
Section: Chapter Questions
Problem 3RE: Reid Company uses the periodic inventory system. On January 1, it had an inventory balance of...
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Transcribed Image Text:The following are the inventories for the years 2016, 2017, and 2018 for Parry Company:
Cost
Market
January 1, 2016
$50,000 $50,000
December 31, 2016
64,000
60,000
December 31, 2017
71,000
70,000
December 31, 2018
75,000
78,000
Required:
1. Assume the inventory that existed at the end of each year was sold in the subsequent year. Prepare journal entries
to record the lower of cost or market for each of the following alternatives.
a. allowance method, perpetual inventory system
b. direct method, perpetual inventory system
2. Next Level Explain any differences in inventory valuation and income between the two methods.
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