Slavton Company uses a periodic inventory system and values its inventory at low

Question

Slavton Company uses a periodic inventory system and values its inventory at lower of cost or market. Is unting records indicate the following information relating to inventory Inventory Date January 1, 2017 December 31, 2017 December 31, 2018 Cost 75,000 110,000 140,000 Market S 75,000 80,000 128,000 Prepare the required journal entries at December 31, 2017, and December 31, 2018, to record the inventory at lower of cost or market using the following methods: a. Direct method b. Allowance method

Explanation / Answer

Direct Method: 12/31/2017 Income Summary 75000 Inventory 75000 12/31/2018 Income Summary 80000 Inventory 80000 12/31/2018 Inventory 128000 Income Summary 128000 Allowan ce Method: 12/31/2017 Income Summary 75000 Inventory 75000 Inventory 110000 Income Summary 110000 Loss Due to Market Valuation 30000 Allowance to Reduce Inventory to Market 30000 12/31/2018 Income Summary 110000 Inventory 110000 Inventory 140000 Income Summary 140000 Allowance to Reduce Inventory to Market 18000 Loss Due to Market Valuation 18000

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