The following are the inventories for the years 2019, 2020, and 2021 for Parry Company:

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, periodic inventory system
b. Direct method, periodic inventory system
2. How does the use of the periodic inventory system affect the write-down of inventory to the lower of cost or net realizable value?

Transcribed Image Text:

Cost NRV January 1, 2019 December 31, 2019 December 31, 2020 December 31, 2021 $50,000 64,000 71,000 75,000 $50,000 60,000 70,000 78,000