Berry uses a perpetual inventory system and the FIFO inventory cost flow assumption.

Required:

$1.$ Assume the inventory that existed at the end of $2019$ was sold in $2020.$ Prepare the necessary journal entries at the end of each year to record the correct inventory valuation if Berry uses the:

a$.$ direct method

b$.$ allowance method

$2.$ Next Level Explain any differences in inventory valuation and income between the two methods.

$2.$ Complete the statements below that explain any differences in inventory valuation and income between the two methods.

The two methods produce the same net inventory valuations and have the same effects on net income. At the end of $2020,$ inventory would be valued at

$

under the direct method and

$

under the allowance method. Income would be reduced by

$

after the entry to reduce inventory to market under the direct method and

$

after the entry to reduce inventory to market under the allowance method.