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 14,000 11,500 December 31, 2017 16,000 14,500 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 b. allowance method 2. Next Level Explain any differences in inventory valuation and income between the two methods Chart of Accounts ASSETS 111 Cash 121 Accounts Receivable 131 Inventory 132 Allowance to Reduce Inventory to Market 141 Prepaid Insurance 181 Equipment 189 Accumulated Depreciation REVENUE 411 Sales Revenue EXPENSES 500 Cost of Goods Sold 505 Loss Due to Market Valuation 510 Purchases 531 Salaries Expense 532 Delivery Expense LIABILITIES 211 Accounts Payable 221 Salaries Payable 231 Unearned Rent 261 Income Taxes Payable 533 Insurance Expense 534 Utilities Expense 541 Depreciation Expense 559 Miscellaneous Expenses 910 Income Tax Expense EQUITY 311 Common Stock 331 Retained Earnings 391 Income Summary 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 DATE Dec. 31, 2016 Cost of Goods Sold Inventory 3 Dec. 31, 2017 Cost of Goods Sold Inventory PAGE 9 GENERAL JOURNAL POST REF DEBIT CREDIT ACCOUNT TITLE 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 1 2 PAGE 9 GENERAL JOURNAL DATE ACCOUNT TITLE POST. REF DEBIT CREDIT 6 Next Level Complete the statements below that explain any differences in inventory valuation and income between the two methods. The two methods produce at S s effects on net income. At the end of 2017, inventory would be valued. under the allowance method Income would be reduced by net inventory valuations and have under the direct method and S after the entry to reduce inventory to market under the direct method and S after the entry to reduce inventory to market under the allowance method