Reference no: EM131921285

Problem - Dover Company began operations in 2012 and determined its ending inventory at cost and at lower-of-cost-or-market at December 31, 2012, and December 31, 2013. This information is presented below.

Cost

Lower-of-Cost-or-Market

12/31/12 $365,930 $338,180

12/31/13 445,900 424,960

(a) Prepare the journal entries required at December 31, 2012, and December 31, 2013, assuming that the inventory is recorded at lower-of-cost-or-market, and a perpetual inventory system. Assume the cost-of-goods-sold method with no allowance used.

(b) Prepare journal entries required at December 31, 2012, and December 31, 2013, assuming that the inventory is recorded at lower-of-cost-or-market, and a perpetual inventory system. Assume the loss method with an allowance used.

(c) Which of the two methods above provides the higher net income in each year?