# Corrs Company began operations in 2016 and determined its ending inventory at cost and at lower-of-LIFO cost-or-market at December 31, 2016, and December 31, 2017. This information is presented below: Cost Lower-of-Cost-or-Market 12/31/16 \$356,000 \$327,000 12/31/17 420,000 395,000 (a) Prepare the journal entries required at December 31, 2016, and December 31, 2017, assuming that the inventory is recorded at market, and a perpetual inventory system (cost-of-goods-sold method) is used. (b) Prepare journal entries required at December 31, 2016, and December 31, 2017, assuming that the inventory is recorded at market under a perpetual system (loss method is used). (c) Which of the two methods above provides the higher net income in each year? Both, COGS Method, or Loss Method?

Explanation:

Journal entries:

a)

Dec 31, 2016

Dr Cost of Goods Sold 29,000

Cr Allowance to reduce inventory to market 29,000

Dec 31, 2017

Dr Allowance to reduce inventory to market 4,000

Cr Cost of Goods Sold 4,000

Calculations:

Inventory cost at 31 December 2016 = 356,000

Less: Lower of cost or market at 31 December 2016 (327,000)

Allowance to reduce inventory to market 29,000

Inventory cost at December 31, 2017   420,000

Less: Lower of cost or market at 31 December 2017 (395,000)

Allowance to reduce inventory to market 25,000

Recovery of previously recognized loss = 29,000 - 25,000 = 4,000

b)

Dec 31, 2017

Dr Loss due to market decline of inventory 29,000

Cr Allowance to reduce inventory to market 29,000

Dec 31, 2017

Dr Allowance to reduce inventory to market 4,000

Cr Loss due to market decline of inventory 4,000

c) In the both cases, net income is the same

## Related Questions

In her role as a grocery store general manager, Shara is able to make changes that affect customers, store employees, and individual department managers.This is an example of the _____ effect. A. efficiencyB. multiplierC. responsibilityD. value

B, multiplier

Explanation:

A multiplier effect simply means having the impact of some action/decision(s) (management skills) felt in multiple ways/areas of an organization.

In the case of Shara as grocery manager, she has been able to affect multiple areas of the store ranging from customers, employees, as well as individual departments through her management skills thus giving her the multiplier effect.

Cheers.

The Town of Red Herring issued \$60,000 of purchase orders. Assume that when all orders were received, the actual cost was \$59,000. How much would be recorded as expenditures when the goods are received? \$60,000. \$59,000. \$1,000. \$0.

It would be 0\$ because they are taking the money into their bank account instead of spending it there fore it is 0\$

The account titles for transaction (D) 5/5 should appear in the Account Title column of the journal entry as A. Merchant’s Bank Equipment—Store
B. Cash Equipment—Store
C. A/P—Bellhaven Bank Cash
D. Inventory—Merchandise P. Woodsley—Capital

The account titles for transaction (D) 5/5 should appear in the Account Title column of the journal entry as A/P—Bellhaven Bank Cash

Hope this helps!!

A small business can thrive, even in a bad economy. True or false

That should be true. As long as the business makes enough money to start off and continues to get money, the business should be fine.

What annual payment must you receive in order to earn a 6.5% rate of return on a perpetuity that has a cost of \$1,600?

The annual payment must you receive in order to earn a 6.5% rate of return on a perpetuity=\$104

Explanation:

Given Data:

Cost of perpetuity=\$1,600

Rate of return=6.5%=0.065

Required:

The annual payment must you receive in order to earn a 6.5% rate of return on a perpetuity=?

Solution:

Formula:

The annual payment must you receive in order to earn a 6.5% rate of return on a perpetuity=\$104

With a patent on drug Z27, why would Able Drug Company charge customers \$7 per 100 units even though its cost of producing 100 units is less than that?

If Able Drug Company already has a patent on a drug called drug Z27, then they have the rights to charge it higher than the cost of production. They do this so that they would gain profit from the drug that they have patented and to be able to expand their business more with it.

Candela Company has retained earnings of \$500,000, common stock of \$400,000, and total common stockholders’ equity of \$1,200,000. It has 200,000 shares of \$2 par value common stock outstanding which is currently selling for \$5 per share. If Candela Company declares a 2-for-1 stock split on its common stock, what will occur?

Stock-split will lead to increase in number of Candela's shares without increase in market value or capitalization

Explanation:

Stock split will increase Candela's shares from 200000 @\$2 nominal value to 400,000 @\$1. While the selling price will now reduce from \$5 to \$2.5. Such that the market capitalization or value of the company is still the same because 2 new shares equal exactly 1 old share.

Norris Company issued 15,000 shares of \$1 par common stock for \$25 per share during2012. The company paid dividends of \$36,000 and issued long-term notes payable of\$330,000 during the year. What amount of cash flows from financing activities will bereported on the statement of cash flows?

total cash generated from financing activities: 669,000

Explanation:

financing activities

from stock issuance 15,000 x 25 = 375,000

long term-note                                 330,000

dividends paid                                  (36,000)

total cash generated from financing activities: 669,000

We will calculate the total cash proceeds fro mthe stock issuance, add up the proceeds from the long and decrease it by the dividends paid amount.

In the United States, you can own anything you want and decide what you want to do with it, as long as it does not violate the law. This describes the principle of