Question 2 (23 marks)

1. The company began its operation in 20X1. At the end of 20X1, the cost of inventory was $160,000 while its NRV was $140,000. At the end of 20X2, the cost of inventory was $140,000, while its NRV was $115,000.

Required (4 marks):

Prepare journal entries to apply lower-of-cost-or-NRV valuation at the end of 20X1 and 20X2 (using the indirect (allowance) method).