(Entries for Lower of Cost or Market—Cost of Goods Sold and Loss) Malone Company determined its ending inventory at cost and at lower of cost or market at December 31, 2011, December 31, 2012, and December 31, 2013, as shown below.
|
|
Cost |
Lower of Cost or Market |
|
12/31/11 |
$650,000 |
$650,000 |
|
12/31/12 |
780,000 |
712,000 |
|
12/31/13 |
905,000 |
830,000 |
Instructions
(a) Prepare the journal entries required at December 31, 2012, and at December 31, 2013, assuming that a perpetual inventory system and the cost of goods sold method of adjusting to lower of cost or market is used.
(b) Prepare the journal entries required at December 31, 2012, and at December 31, 2013, assuming that a perpetual inventory is recorded at cost and reduced to lower of cost or market using the loss method.