Question

Blue Inc. uses a perpetual inventory system, At January 1, 2020, inventory was $211730700 at both cost and realizable value. At December 31, 2020, the inventory was $282019300 at cost and $261131400 at realizable value.

Prepare the necessary December 31 entry under (a) the cost-of-goods-sold method (b) Loss method. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

Answer 1

Answer: please see answer in explanation column

Explanation:Loss in value of inventory cost to market

=$282,019,300  -   $261,131,400=  $20,887,900

For December 31, 2020, we have

a) Cost of goods sold method

                   Journal

                                                               Debit              Credit

Cost of goods sold                 $20,887,900

Allowance to reduce inventory to market               $20,887,900

b)Loss Method  

        Journal

                                                          Debit                        Credit

Loss due to market decrease of inventory $20,887,900

Allowance to reduce inventory to market                $20,887,900

Answer 2

Answer:

Cost of Good Sold 20887900

Allowance to Reduce Inventory to market 20887900

Loss Due to Decline of Inventory to NRV 20887900

Allowance to Reduce Inventory to NRV 20887900

Explanation:

Because the question said both cost and realizable value