Question

There are 3 journal entries, please show all work

Sandhill Company began operations in 2019 and determined its ending inventory at cost and at lower-of-LIFO-cost-or-market at December 31, 2019, 2020 and 2021. This information is presented below. Lower-of-Cost-or- Market Cost December 31, 2019 December 31, 2020 December 31, 2021 $100,920 116,000 112,520 $82,360 113,680 112,520 (a) Prepare the journal entries assuming that the inventory is recorded at market, and a perpetual inventory system (cost-of- goods-sold method) is used. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit 12/31/19 Cost of goods sold Allowance to reduce inventory to NRV 12/31/20 Allowance to Reduce Inventory to NRV Cost of goods sold 12/31/21

Answer 1

Journal Entries:

Date	Particulars	Debit ($)	Credit ($)
12/31/19	Cost of Goods Sold A/c Dr               To Allowance to reduce inventory to NRV A/c (To reduce the inventory to record at Market value)	18,560	18,560
12/31/20	Allowance to reduce inventory to NRV A/c Dr              To Cost of Goods Sold A/c (To record the recovery of previously recognized loss)	16,240	16,240
12/31/21	No journal entry as the cost of inventory is same as the market value

Working Notes:

No	Detail		amount
1	Cost of inventory as on Dec 31, 2019	$100,920
2	Lower of cost or market at Dec 31,2019	($82,360)
3	Allowance amt needed to reduce inventory to market	(1 - 2)	$18,560
4	Cost of inventory as on Dec 31, 2020	$116,000
5	Lower of cost or market at Dec 31,2020	($113,680)
6	Allowance amt needed to reduce inventory to market	(4-5)	$2,320
7	Recovery of previously recognized loss	(3-6) ($18,560- $2,320)	$16,240