Exercise 9-4

Grouper Company began operations in 2017 and determined its ending inventory at cost and at LCNRV at December 31, 2017, and December 31, 2018. This information is presented below.

	Cost	Net Realizable Value
12/31/17	$341,860	$318,330
12/31/18	$376,520	$357,230

(a) Prepare the journal entries required at December 31, 2017, and December 31, 2018, assuming inventory is recorded at LCNRV and a perpetual inventory system using the cost-of-goods-sold method. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
12/31/17
12/31/18

(b) Prepare journal entries required at December 31, 2017, and December 31, 2018, assuming inventory is recorded at cost and a perpetual system using the loss method. (Use Recovery of Loss Inventory account.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
12/31/17
12/31/18

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

A: Both Methods have the same effect

B: Cost-of-goods-sold method

C: Loss Method

Also attached is the list of accounts

Accounts Payable Adjustment to Record Inventory at Cost Allowance to Reduce Inventory to Market Allowance to Reduce Inventory to NRV Biological Assets - Shearing Sheep Cash Cost of Goods Sold Estimated Liability on Purchase Commitments Inventory Inventory Over and Short Loss Due to Decline of Inventory to NRV Loss Due to Market Decline of Inventory Notes Payable Purchases Raw Materials Recovery of Loss Due to Market Decline of Inventory Recovery of Loss Inventory Salaries and Wages Expense Sales Revenue Unrealized Holding Gain or Loss - Equity Unrealized Holding Gain or Loss - Income Wool Inventory