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Entries for Lower-of-Cost-or-Market-Direct and Allowance Malone Company determined its ending inventory at cost and at lower-of-cost-or-market at December 31, 2009, December 31, 2010, and December 31, 2011, as shown below.
(a) Prepare the journal entries required at December 31, 2010, and at December 31, 2011, assuming that a perpetual inventory system and the direct method of adjusting to lower-of-cost-or-market is used.
(b) Prepare the journal entries required at December 31, 2010, and at December 31, 2011, assuming that a perpetual inventory is recorded at cost and reduced to lower-of-cost-or-market through the use of an allowance account (indirect method).
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