Corrs Company began operations in 2013 and determined its ending inventory at cost and at lower-of-cost-or-market at December 31, 2013, and December 31, 2014. This information is presented below.
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|
Cost |
|
Lower-of-Cost-or-Market |
| 12/31/13 |
|
$365,410 |
|
$337,500 |
|
| 12/31/14 |
|
444,440 |
|
424,110 |
|
(a) Prepare the journal entries required at December 31, 2013, and December 31, 2014, assuming that the inventory is recorded at market, and a perpetual inventory system (direct method) is used.(Credit account titles are automatically indented when amount is entered. Do not indent manually.)
| Date |
Account Titles and Explanation |
Debit |
Credit |
| 12/31/13 |
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| 12/31/14 |
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(b) Prepare journal entries required at December 31, 2013, and December 31, 2014, assuming that the inventory is recorded at cost and an allowance account is adjusted at each year-end under a perpetual system.(Credit account titles are automatically indented when amount is entered. Do not indent manually.)
| Date |
Account Titles and Explanation |
Debit |
Credit |
| 12/31/13 |
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| 12/31/14 |
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(c) Which of the two methods above provides the higher net income in each year?
| Both methods have the same effectCost-of-goods-sold method with no allowance usedLoss method with an allowance used |