Please read the question carefully. (not under a perpetual inventory system)
Monster Company began operations in 2013 and, as presented below, determined its ending inventory at cost and at NRV as of December 31, 2013, December 31, 2014, December 31, 2015.
Date Cost Net Realizable Value
12/31/13 $356,000 $349,000
12/31/14 336,000 325,000
12/31/15 316,000 350,000
a. Prepare the journal entries required at 12/31/2013, 12/31/2014, and 12/31/2015 using a contra-asset account, assuming that the inventory is recorded at LCNRV, using the cost-of -goods -sold method.
b. Prepare the journal entries required at 12/31/2013, 12/31/2014, and 12/31/2015 using a contra-asset account, assuming that the inventory is recorded at LCNRV, the loss method.
c. in each year, which of the two methods above provides the higher net income?