Problem: Crane Company began operations in 2017 and determined its ending inventory at cost and at LCNRV at December 31, 2017, and December 31, 2018. This information is presented below.
|
|
Cost
|
Net Realizable Value
|
|
12/31/17
|
$318,270
|
$296,260
|
|
12/31/18
|
440,430
|
a422,800
|
Required:
(a) Prepare the journal entries required at December 31, 2017, and December 31, 2018, assuming inventory is recorded at LCNRV and a perpetual inventory system using the cost-of-goods-sold method.
(b) Prepare journal entries required at December 31, 2017, and December 31, 2018, assuming inventory is recorded at cost and a perpetual system using the loss method.
(c) Which of the two methods above provides the higher net income in each year?