he J. Love Company uses a periodic inventory accounting system and values its inventory by using the lower of cost or NRV rule. The allowance method is used in applying the lower of cost or NRV rule. The company adjusts and closes its books annually on December 31. Below are the cost and market values of the company's year-end inventories for a three-year period: Date Cost Market December 31, 2018 $70,000 $70,000 December 31, 2019 56,000 46,000 December 31, 2020 64,000 58,000 Refer to Exhibit 8-3. Which of the following journal entries would be correct as of December 31, 2020, to apply the lower of cost or market rule? a. Inventory 58,000 Income Summary 58,000 b. Allowance to Reduce Inventory to NRV 4,000 Loss Recovery Due to Write-Down of Inventory 4,000 c. Loss Due to Write-Down of Inventory 6,000 Allowance to Reduce Inventory to NRV 6,000 d. Cost of Goods Sold 6,000 Allowance to Reduce Inventory to NRV 6,000
he J. Love Company uses a periodic inventory accounting system and values its inventory by using the lower of cost or NRV rule. The allowance method is used in applying the lower of cost or NRV rule. The company adjusts and closes its books annually on December 31. Below are the cost and market values of the company's year-end inventories for a three-year period: Date Cost Market December 31, 2018 $70,000 $70,000 December 31, 2019 56,000 46,000 December 31, 2020 64,000 58,000 Refer to Exhibit 8-3. Which of the following journal entries would be correct as of December 31, 2020, to apply the lower of cost or market rule? a. Inventory 58,000 Income Summary 58,000 b. Allowance to Reduce Inventory to NRV 4,000 Loss Recovery Due to Write-Down of Inventory 4,000 c. Loss Due to Write-Down of Inventory 6,000 Allowance to Reduce Inventory to NRV 6,000 d. Cost of Goods Sold 6,000 Allowance to Reduce Inventory to NRV 6,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Exhibit 8-3
The J. Love Company uses a periodic inventory accounting system and values its inventory by using the lower of cost or NRV rule. The allowance method is used in applying the lower of cost or NRV rule. The company adjusts and closes its books annually on December 31. Below are the cost and market values of the company's year-end inventories for a three-year period:
Refer to Exhibit 8-3. Which of the followingjournal entries would be correct as of December 31, 2020, to apply the lower of cost or market rule?
The J. Love Company uses a periodic inventory accounting system and values its inventory by using the lower of cost or NRV rule. The allowance method is used in applying the lower of cost or NRV rule. The company adjusts and closes its books annually on December 31. Below are the cost and market values of the company's year-end inventories for a three-year period:
| Date | Cost | Market |
| December 31, 2018 | $70,000 | $70,000 |
| December 31, 2019 | 56,000 | 46,000 |
| December 31, 2020 | 64,000 | 58,000 |
Refer to Exhibit 8-3. Which of the following
a.
| Inventory | 58,000 | |||
| Income Summary | 58,000 |
b.
| Allowance to Reduce Inventory to NRV | 4,000 | |||
| Loss Recovery Due to Write-Down of Inventory | 4,000 |
c.
| Loss Due to Write-Down of Inventory | 6,000 | |||
| Allowance to Reduce Inventory to NRV |
6,000 |
d.
| Cost of Goods Sold | 6,000 | |||
| Allowance to Reduce Inventory to NRV |
6,000 |
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