In: Accounting
The inventories of Berry Company for the years 2016 and 2017 are as follows:
Cost |
Market |
|
January 1, 2016 | $10,000 | $10,000 |
December 31, 2016 | 13,000 | 11,500 |
December 31, 2017 | 15,000 | 14,000 |
Berry uses a perpetual inventory system.
Assume Berry uses the direct method.
Prepare the necessary journal entries to record:
|
Assume Berry uses the allowance method.
Prepare the necessary journal entries to record:
|
Required journal entries:
Under the direct method:
Under the allowance method:
The correct inventory valuation under both methods is the same; on December 31, 2016, it is $11,500.
The reduction in inventory in 2017 is $1000 under both methods.
The correct inventory valuation under both methods is the same; on December 31, 2017, it is $14,000.