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Journal Entries

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E9-4
Corrs Company began operations in 2007 and determined its ending inventory at cost and at
lower-of-cost-or-market at December 31, 2007, and December 31, 2008. The information is
presented below.

Cost Lower-of-cost-or-market
31/12/2007 $346,000 $327,000
31/12/2008 $410,000 $395,000

Instructjons:
(a) Prepare the journal entries required at December 31, 2007, and December 31, 2008, assuming
that the inventory is recorded at market, and a perpetual inventory system (direct method) is used.
(b) Prepare the journal entries required at December 31, 2007, and December 31, 2008, assuming
that the inventory is recorded at cost and an allowance account is adjusted at each year end under
the perpetual system.
(c) Which of the two methods aboce provides the higher net income in each year?

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E9-4
Corrs Company began operations in 2007 and determined its ending inventory at cost and at
lower-of-cost-or-market at December 31, 2007, and December 31, 2008. The information is
presented below.

Cost Lower-of-cost-or-market
31/12/2007 $346,000 $327,000
31/12/2008 $410,000 $395,000

Instructjons:
(a) Prepare the journal entries required at December 31, 2007, and ...

Solution Summary

The solution explains the journal entries for recording inventory.

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