Practice Exercise 9-2 Crane Company began operations in 2016 and determined its

Question

Practice Exercise 9-2 Crane Company began operations in 2016 and determined its ending inventory at cost and at lower-of-LIFo-cost-or-market at December 31, 2016, and December 31, 2017. This information is presented below. Lower-of-Cost-or- Market Cost December 31, 2016 December 31, 2017 December 31, 2018 $66,120 76,000 73,720 $53,960 74,480 73,720 Prepare the journal entries assuming that the inventory is recorded at market, and a perpetual inventory system (cost-of-goods-sold method) is used. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit 12/31/16 Cost of Goods Sold 12,160 Allowance to Reduce Inventory to Market 12, 1601 12/31/17 Allowance to Reduce Inventory to Market 106 Cost of Goods Sold 12/31/18 Allowance to Reduce Inventory to Market of Goods Sold

Explanation / Answer

Dear Student,

Cost of Goods sold method :

NIL

Loss Method:

Net Income through both th options remains same only the presentation is different;

Regards,

Date Account Title & Explanation Debit Credit 12/31/2016 Cost of Goods Sold (66,120-53,960) 12,160      Allowance to reduce Inventory to Market 12,160 12/31/2017 Cost of Goods Sold (76,000-74,480) 1,520      Allowance to reduce Inventory to Market 1,520 12/31/2018 Cost of Goods Sold (73,720-73,720) NIL      Allowance to reduce Inventory to Market

NIL

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