Exercise
Cheyenne Company began operations in 2017 and determined its ending inventory at cost and at LCNRV at December 31, 2017, and December 31, 2018. This information is presented below.
| Cost |
Net Realizable Value
|
| 12/31/17 |
$356,450 |
$331,660 |
| 12/31/18 |
443,620 |
422,750 |
(a) Prepare the journal entries required at December 31, 2017, and December 31, 2018, 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 0 for the amounts.)
(b) Prepare journal entries required at December 31, 2017, and December 31, 2018, assuming inventory is recorded at cost 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.)
(c) Which of the two methods above provides the higher net income in each year?