At year end, the XYZ Company had the following information available:

Item	Cost	Replacement Cost	Sales Price	Net Realizable Value (NRV)	Normal Profit
A	70,000	62,500	64,000	56,000	5,100
B	86,000	79,400	94,000	84,800	7,400
C	112,000	124,000	186,400	168,300	18,500
D	140,000	126,000	154,800	140,000	15,400
Total	408,000	391,900	499,200	449,100	46,400

The Allowance to Reduce Inventory to Net Realizable Value (NRV) has a credit balance of $27,500, prior to any required adjusting entry.

Determine the proper balance in the Allowance to Reduce Inventory to Market at year end:

Determine the amount of the gain or loss that should be recorded due to the change in the Allowance to Reduce Inventory to Market:

Using the attached T-account template, prepare the entry to recognize the gain or loss due to the change in the Allowance to Reduce Inventory to Market: