Question - 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, under a perpetual inventory system 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, under a perpetual inventory system using the loss method.
c. In each year, which of the two methods above provides the higher net income?