Corrs Company began operations in 2016 and determined its ending inventory at cost and at lower-of-LIFO cost-or-market at December 31, 2016, and December 31, 2017. This information is presented below:
Cost
Lower-of-Cost-or-Market
12/31/16 $356,000 $327,000
12/31/17 420,000 395,000
(a) Prepare the journal entries required at December 31, 2016, and December 31, 2017, assuming that the inventory is recorded at market, and a perpetual inventory system (cost-of-goods-sold method) is used.
(b) Prepare journal entries required at December 31, 2016, and December 31, 2017, assuming that the inventory is recorded at market under a perpetual system (loss method is used).
(c) Which of the two methods above provides the higher net income in each year? Both, COGS Method, or Loss Method?
The following information is known for the month of December: Purchases of supplies during December total $4,500. Supplies on hand at the end of December equal $3,500. No insurance payments are made in December. Insurance cost is $2,000 per month. November salaries payable of $11,000 were paid to employees in December. Additional salaries for December owed at the end of the year are $16,000. On November 1, a tenant paid Golden Eagle $4,500 in advance rent for the period November through January, and Deferred Revenue was credited for the entire amount.
Required:
Show the adjusting entries that were made for supplies, prepaid insurance, salaries payable, and unearned revenue on December 31.
