Question

Question 3 (12 marks) Davy Company began operations in 2019 and determined its ending inventory at cost and at NRV at December 31, 2019, and December 31, 2020. This information is presented below. Net Realizable Value Cost December 31, 2019 $520,000 December 31, 2020 $605,000 Allowance to Reduce Inventory to NRV $24,000 (2) $585,000 Required (a) Compute (1) and (2) in the table above. (4 marks) (b) Prepare the journal entries required at December 31, 2019, and December 31, 2020, assuming that the inventory is recorded at LCNRV, using a perpetual inventory system and the cost-of-goods-sold method. (4 marks) (C) Prepare the journal entries required at December 31, 2019, and December 31, 2020, assuming the inventory is recorded at LCNRV, using a perpetual inventory system and the loss method. (4 marks)

Answer 1

Cost NRU Allowance to Reduce Inu to ARU. Dec 31, 2019 $ 520,000 $ 24,000 Dec 31, 2020 $ 605,000 $ 585,000 Calculation of li) :- $ 496,000 $ 5,20,000 - $24,000 - calculation of (2): - 11 $ 20,000 & $ 605,000 - $ 585,000