Inventory Write-Down Instructions Instructions Chart of Accounts General Journal Next Level The inventories of Berry Company for the years 2019 and 2020 are as follows: Cost NRV January 1, 2019 $10,000 $10,000 December 31, 2019 13,000 11,500 December 31, 2020 15.000 14,000 Chart of Accounts CHART OF ACCOUNTS Berry Company General Ledger 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. General Journal 1a. Assume Berry uses the direct method. Prepare the necessary journal entries to record: 1. the correct inventory valuation on December 31, 2019 inventory when the inventory from December 31, 2019 is sold during 2020 3. the correct inventory valuation on December 31, 2020 2. the reduction General Journal Instructions PAGE 1 ASSETS 111 Cash 121 Accounts Receivable 131 Inventory 132 Allowance to Reduce Inventory to NRV 141 Prepaid Insurance X 181 Equipment 189 Accumulated Depreciation LIABILITIES 211 Accounts Payable * REVENUE 411 Sales Revenue EXPENSES 500 Cost of Goods Sold 505 Loss on Write-Down of Inventory 510 Purchases 531 Salaries Expense 532 Delivery Expense 533 Insurance Expense 534 Utilities Expense 541 Depreciation Expense 221 Salaries Payable 231 Unearned Rent 261 Income Taxes Payable 910 Income Tax Expense 559 Miscellaneous Expenses GENERAL JOURNAL DATE ACCOUNT TITLE 1 3 4 1b. Assume Berry uses the allowance method. POST. REF. DEBIT CREDIT Prepare the necessary journal entries to record: 1. the correct inventory valuation on December 31, 2019 2. the reduction inventory when the inventory from December 31, 2019 is sold during 2020 3. the correct inventory valuation on December 31, 2020 General Journal Instructions 2 Next Level GENERAL JOURNAL DATE ACCOUNT TITLE PAGE 1 POST. REF. DEBIT CREDIT 2. Complete the statements below that explain any differences in inventory valuation and income between the two methods. The two methods produce net inventory valuations and have method and S $ EQUITY 311 Common Stock 331 Retained Earnings 391 Income Summary effects on net income. At the end of 2020, inventory would be valued at $ under the allowance method. Income would be reduced by S under the direct 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.