On December 31, 2020, Duncan Inc. estimated the cost of inventory under the average cost method to be $187,600 and the net realizable value of inventory to be $179,000. The company has not previously recorded a holding loss on inventory.

a. Prepare the journal entry to record the holding loss on inventory using an allowance account to reduce inventory and cost of goods sold to adjust expense.

b. Prepare the journal entry to record the holding loss on inventory using an allowance account to reduce inventory and a separate loss account to adjust equity.

Account NameDRCRab