The following are the inventories for Year $2,$ Year $3,$ and Year $4$ for Parry Company:

Cost

NRV

January $1,$ Year $2$ $$50,000$ $$50,000$

December $31,$ Year $264,00060,000$

December $31,$ Year $371,00070,000$

December $31,$ Year $475,00078,000$

Required:

$1.$ Assume the inventory that existed at the end of each year was sold in the subsequent year. Prepare journal entries to record the lower of cost or net realizable value for each of the following alternatives:

a$.$ allowance method, perpetual inventory system.

b$.$ direct method, perpetual inventory system.

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