Question

In: Accounting

The inventories of Berry Company for the years 2016 and 2017 are as follows: Cost Market...

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:
1. the correct inventory valuation on December 31, 2016
2. the reduction in inventory when the inventory from December 31, 2016 is sold during 2017
3. the correct inventory valuation on December 31, 2017

Assume Berry uses the allowance method.

Prepare the necessary journal entries to record:
1. the correct inventory valuation on December 31, 2016
2. the reduction in inventory when the inventory from December 31, 2016 is sold during 2017
3. the correct inventory valuation on December 31, 2017

Solutions

Expert Solution

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.

ekkarill92 answered 2 years ago
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