Negredo Medical Supplies uses LIFO cost flow assumption and has developed the following data for its products:

	Surgical Equipment	Surgical Supplies
Number of units in inventory	400	370
Per unit:
Selling Price	345	205
Cost	255	175
Replacement cost	325	165
Cost to sell	64	22
Normal gross profit ratio	30%	35%

Normal gross profit ratio is expressed as a percentage of selling price. Negredo adjusts an allowance account at year-end to record net realizable value adjustments to its inventory. All products are reported at cost at the beginning of the year. The entry at year-end will:

Multiple Choice

• reduce assets by $31,000

• reduce equity by $3,700

• reduce equity by $31,000

• increase liabilities by $3,700