Question

Headland Company determined its ending inventory at cost and at LCNRV at December 31, 2020, December 31, 2021, and December 31, 2022, as shown below. Cost NRV 12/31/20 $650,200 $650,200 12/31/21 778,000 705,000 12/31/22 958,800 878,200 Your answer is correct. Prepare the journal entries required at December 31, 2021, and at December 31, 2022, assuming that a perpetual inventory system and the cost-of- goods-sold method of adjusting to LCNRV is used. (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 for the amounts.) Debit Credit Date Account Titles and Explanation 12/31/21 Cost of Goods Sold 73000 Allowance to Reduce Inventory to NRV 73000 12/31/22 Cost of Goods Sold 7600 Allowance to Reduce Inventory to NRV 7600

Answer 1

Headland Company
Cost of goods sold-Sold Method
Date	Account Title & Explanation	Debit	Credit
31-12-2021	Cost of goods sold($778000-$705000)	$ 73,000.00
	To Allowance to reduce inventory to NRV		$ 73,000.00
31-12-2022	Cost of goods sold($958800-$878200-$73000)	$   7,600.00
	To Allowance to reduce inventory to NRV		$   7,600.00
Headland Company
Cost of goods sold-Loss Method
Date	Account Title & Explanation	Debit	Credit
31-12-2021	Loss due to decline of inventory to NRV($778000-$705000)	$ 73,000.00
	To Allowance to reduce inventory to NRV		$ 73,000.00
31-12-2022	Loss due to decline of inventory to NRV($958800-$878200-$73000)	$   7,600.00
	To Allowance to reduce inventory to NRV		$   7,600.00