Question

Discussions Conferences Windsor Company began operations in 2020 and determined its ending inventory at cost and at LCNRV at December 31, 2020, and December 31, 2021. This information is presented below. Collaborations WileyPLUS Support Net Realizable Value Cost $344.770 12/31/20 12/31/21 $367.920 385,050 365.940 (a) Prepare the journal entries required at December 31, 2020, and December 31, 2021, assuming inventory is recorded at LCNRV and a perpetual inventory system using the cost-of-goods-sold method. (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 for the amounts.) Date Account This and Explanatics 12/31/20 12/31/21 (b) Prepare journal entries required at December 31, 2020, and December 31, 2021, assuming inventory is recorded at LCNRV and a perpetual system using the loss method. (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 0 for the amounts.) Date Account Tweed Explanatic 12/31/20 12/31/21 (c) Which of the two methods above provides the higher net income in each year?

Answer 1

Answer:

Journal entries
	Date	Accounting titles & Explanations	Debit($)	Credit($)
a)	12/31/2017	cost of goods sold	23,150
		Allowance to reduce inventory to NRV		23,150
		(367,920-344,770)
	12/31/2018	allowance to reduce inventory to NRV	4,040
		Cost of goods sold		4,040
		23,150 - (385050-365940)
b)	12/31/2017	loss due to decline of inventory to NRV	23,150
		Allowance to reduce inventory to NRV		23,150
	12/31/2018	Allowance to reduce inventory to NRV	4,040
		Recovery or inventory loss		4,040