Question

Exercises os Bonita Company began operations in 2019 and determined its ending inventory at cost and at lowerof-LIFO costo market at December 31, 2019, and December 31, 2020. This information is presented below: Cost 12/31/19 12/31/20 $335,230 408,990 Lower-of-Cost-or-Market $314,700 392,590 (a) Prepare the journal entries required at December 31, 2019, and December 31, 2020, assuming that the inventory recorded at market and a perpetual Inventory system (cost-of-goods-sold method) is used. (Credit accountries are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry for the account is and enter for the amounts) Debit Credit Date Account Tities and Explanation 12/31/19 12/31/20

Answer 1

Accounts title and Explanation Date Debit Credit 12/31/2019 Cost of goods sold (335,230-314,700) Allowance to reduce inventory to NRV 20530 20530 12/31/2020 Allowance to reduce inventory to NRVV 4,130 Cost of goods sold [20,530 - (408,990 -392,590)] 4,130 12/31/2019 Loss due to decline of inventory to NRV (b) 20530 Allowance to reduce inventory to NRV 20530 12/31/2020 Allowance to reduce inventory to NRV Recovery or inventory loss 4,130 4,130 (c) Both method provide same net income.