Applying LCM, NeCo determines that as of Dec. 31, 20x3, merchandise that originally cost $46,300 is now $43,500 at market.

a. Make no entry but disclose the loss in a note on the financial statement.

b. Make no entry and make no disclosure

c. Make an entry to reduce retained earnings.

d. Make an entry to increase cost of goods sold

Early in 20x4, the market value of NeCo's inventory unexpectedly increases to $47,500. If the original credit to write down inventory was to the Inventory account, NeCo should....

a. Recognize a $4,000 gain.

b. Recognize a $2,000 gain

c. Make no entry but disclose the loss in a note accompanying the financial statements

d. Make no entry and make no disclosure.