Corrs Company began operations in 2013 and determined its ending inventory at cost and at lower-of-cost-or-market at December 31, 2013, and December 31, 2014. This information is presented below.
| Cost | Lower-of-Cost-or-Market | ||||
| 12/31/13 | $365,410 | $337,500 | |||
| 12/31/14 | 444,440 | 424,110 | |||
(a)Prepare the journal entries required at December 31, 2013, and December 31, 2014, assuming that the inventory is recorded at market, and a perpetual inventory system (direct method) is used.(Credit account titles are automatically indented when amount is entered. Do not indent manually.)
| Date | Account Titles and Explanation | Debit | Credit |
| 12/31/13 | |||
| 12/31/14 | |||
(b) Prepare journal entries required at December 31, 2013, and December 31, 2014, assuming that the inventory is recorded at cost and an allowance account is adjusted at each year-end under a perpetual system.(Credit account titles are automatically indented when amount is entered. Do not indent manually.)
| Date | Account Titles and Explanation | Debit | Credit |
| 12/31/13 | |||
| 12/31/14 | |||
(c) Which of the two methods above provides the higher net income in each year?
| Both methods have the same effectCost-of-goods-sold method with no allowance usedLoss method with an allowance used |