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Recording a Loss in Applying Lower-of-Cost-or-Net Realizable Value On December 31, Vale Inc. estimated the cost of inventory under the average cost method to be $88,000 and the net realizable value of inventory to be $85,000. The company did not previously record a holding loss on inventory. a. Prepare the journal entry to record the holding loss on inventory. The company uses an allowance account to reduce inventory and it uses cost of goods sold to adjust expense. b. Prepare the journal entry to record the holding loss on inventory. The company uses an allowance account to reduce inventory and it uses a separate loss account to adjust equity