Question

As a result of its annual inventory count, Bramble Corp. determined its ending inventory at cost and at lower of cost and net realizable value at December 31, 2019, and December 31, 2020. December 31, 2019, was Bramble’s first year end. This information is as follows: Cost Lower of Cost and NRV Dec. 31, 2019 $ 321,000 $283,350 Dec. 31, 2020 385,100 351,950

Prepare the journal entries required at December 31, 2019 and 2020, assuming that the inventory is recorded directly at the lower of cost and net realizable value and a periodic inventory system is used. (Credit account titles are automatically indented when the 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.) Date Account Titles and Explanation Debit Credit 12/31/19 enter an account title to record ending inventory at LC and NRV on December 31, 2019 enter a debit amount enter a credit amount enter an account title to record ending inventory at LC and NRV on December 31, 2019 enter a debit amount enter a credit amount (To record ending inventory at LC and NRV) 12/31/20 enter an account title to transfer out beginning inventory balance on December 31, 2020 enter a debit amount enter a credit amount enter an account title to transfer out beginning inventory balance on December 31, 2020 enter a debit amount enter a credit amount (To transfer out beginning inventory balance) 12/31/20 enter an account title to record ending inventory at LC and NRV on December 31, 2020 enter a debit amount enter a credit amount enter an account title to record ending inventory at LC and NRV on December 31, 2020 enter a debit amount enter a credit amount (To record ending inventory at LC and NRV) SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT LINK TO TEXT

Prepare the journal entries required at December 31, 2019 and 2020, assuming that the inventory is recorded at cost and an allowance account is adjusted at each year end under a periodic system. (Credit account titles are automatically indented when the 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.) Date Account Titles and Explanation Debit Credit 12/31/19 enter an account title to record ending inventory at cost on December 31, 2019 enter a debit amount enter a credit amount enter an account title to record ending inventory at cost on December 31, 2019 enter a debit amount enter a credit amount (To record ending inventory at cost) 12/31/19 enter an account title to write-down inventory to lower NRV on December 31, 2019 enter a debit amount enter a credit amount enter an account title to write-down inventory to lower NRV on December 31, 2019 enter a debit amount enter a credit amount (To write-down inventory to lower NRV) 12/31/20 enter an account title to transfer out beginning inventory balance on December 31, 2020 enter a debit amount enter a credit amount enter an account title to transfer out beginning inventory balance on December 31, 2020 enter a debit amount enter a credit amount (To transfer out beginning inventory balance) 12/31/20 enter an account title to record ending inventory at cost on December 31, 2020 enter a debit amount enter a credit amount enter an account title to record ending inventory at cost on December 31, 2020 enter a debit amount enter a credit amount (To record ending inventory at cost) 12/31/20 enter an account title to record recovery of write down of inventory to lower NRV on December 31, 2020 enter a debit amount enter a credit amount enter an account title to record recovery of write down of inventory to lower NRV on December 31, 2020 enter a debit amount enter a credit amount (To record recovery of write down of inventory to lower NRV) SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT LINK TO TEXT

Which of the two methods above provides the higher net income in each year? select a method The method in which inventory is recorded at cost and an allowance account is adjusted at each year end is higher.Both methods have the same effect on net income.The method in which inventory is recorded directly at the lower of cost and net realizable value is higher.

Answer 1

A periodic inventory system only updates the ending inventory balance in the general ledger when a physical inventory count is conducted.

Response for first table :

Date	Account Titles and Explanation	Debit	Credit
31-Dec-19	Inventory (ending)	283,350
	Cost of Goods Sold / Purchase		283,350
	(To record ending inventory at LC and NRV)
31-Dec-20	Cost of Goods Sold / Purchase	283,350
	Inventory		283,350
	(To transfer out beginning inventory balance)
31-Dec-20	Inventory	351,950
	Cost of Goods Sold / Purchase		351,950
	(To record ending inventory at LC and NRV)

Response for table 2 :

Date	Account Titles and Explanation	Debit	Credit
31-Dec-19	Inventory	321,000
	Cost of Goods Sold / Purchase		321,000
	(To record ending inventory at cost)
31-Dec-19	Inventory Allowance A/c	37,650
	Inventory		37,650
	(To write-down inventory to lower NRV)
31-Dec-20	Cost of Goods Sold / Purchase	283,350
	Inventory		283,350
	(To transfer out beginning inventory balance)
31-Dec-20	Inventory	385,100
	Cost of Goods Sold / Purchase		385,100
	(To record ending inventory at cost)
31-Dec-20	Inventory Allowance A/c	33,150
	Inventory		33,150
	(To record recovery of write down of inventory to lower NRV)