(b) Prepare journal entries required at December 31, 201/, and December 31, 2018

Question

(b) Prepare journal entries required at December 31, 201/, and December 31, 2018, assuming inventory is recorded at cost and a perpetual system using the loss method. (Use Recovery of Loss Inventory account.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter O for the amounts.) man Date Account Titles and Explanation Credit 12/31/17T Final Java 12/31/18 xtra (c) Which of the two methods above provides the higher net income in each year?

Explanation / Answer

SOLUTION

(A)

(B)

(C) Both methods have the same effect.

Date Accounts title and explanations Debit ($) Credit ($) 12/31/17 Cost of goods sold (322,170 - 299,520) 22,650   Allowance to Reduce Inventory to NRV 22,650 12/31/18 Allowance to Reduce Inventory to NRV 3,840   Cost of goods sold [22,650 -(409,250 - 390,440)] 3,840

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