The inventories of Berry Company for the years 2016 and 2017 are as follows:

	Cost	Market
January 1, 2016	$10,000	$10,000
December 31, 2016	13,000	11,500
December 31, 2017	15,000	14,000

Berry uses a perpetual inventory system.

Required:

1.

Assume the inventory that existed at the end of 2016 was sold in 2017. Prepare the necessary journal entries at the end of each year to record the correct inventory valuation if Berry uses the:

a. direct method

Assume Berry uses the direct method.

Prepare the necessary journal entries to record:

	1. the correct inventory valuation on December 31, 2016
	2. the reduction in inventory when the inventory from December 31, 2016 is sold during 2017 Additional Instructions
	3. the correct inventory valuation on December 31, 2017

b. allowance method

Assume Berry uses the allowance method.

Prepare the necessary journal entries to record:

	1. the correct inventory valuation on December 31, 2016
	2. the reduction in inventory when the inventory from December 31, 2016 is sold during 2017 Additional Instructions
	3. the correct inventory valuation on December 31, 2017

Chart of Accounts to pick from:

CHART OF ACCOUNTS

Chapter 8

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
131	Inventory
132	Allowance to Reduce Inventory to Market
141	Prepaid Insurance
181	Equipment
189	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
221	Salaries Payable
231	Unearned Rent
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings
391	Income Summary

	REVENUE
411	Sales Revenue

	EXPENSES
500	Cost of Goods Sold
505	Loss Due to Market Valuation
510	Purchases
531	Salaries Expense
532	Delivery Expense
533	Insurance Expense
534	Utilities Expense
541	Depreciation Expense
559	Miscellaneous Expenses
910	Income Tax Expense