For the question below: All solutions currently on Chegg are not right. I tried
ID: 2398381 • Letter: F
Question
For the question below: All solutions currently on Chegg are not right. I tried them. Also the one in the solution bundle for the text came up incorrect as well. Please help.
Corrs 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:
Date Cost Lower-of-Cost-or-Market
12/31/16 $356,000 $327,000
12/31/17 420,000 395,000
(a) Prepare the journal entries required at December 31, 2016, and December 31, 2017, assuming that the inventory is recorded at market, and a perpetual inventory system (cost-of-goods-sold method) is used.
(b) Prepare journal entries required at December 31, 2016, and December 31, 2017, assuming that the inventory is recorded at market under a perpetual system (loss method is used).
(c) Which of the two methods above provides the higher net income in each year? The options are: Both methods have the same effect, COGS Method, or Loss Method
Explanation / Answer
a) Date Account Titles Debit Credit Dec 2016 Cost of good sold ($356,000 - $327,000) $29,000.00 Allowance to Reduce Inventory to Market $29,000.00 Dec 2017 Allowance to Reduce Inventory to Market $4,000.00 Cost of good sold $4,000.00 $29000 - ($420,000 - $395,000) b) Dec 2016 Loss Due to Market Decline of Inventory $29,000.00 Allowance to Reduce Inventory to Market $29,000.00 Dec 2017 Allowance to Reduce Inventory to Market $4,000.00 Loss Due to Market Decline of Inventory $4,000.00 c) Both methods have the same effect