Recording a Loss in Applying Lower of Cost or Net Realizable Value On December 31, 2020, Vale Inc estimated the cost of inventory under the average cost method to be $70,400 and the net realizable value of inventory to be $68,000 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 Name Dr Cr a CashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained EarningsPrior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN A CashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained EarningsPrior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN A b CashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained EarningsPrior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN A CashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained EarningsPrior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN A

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Recording a Loss in Applying Lower-of-Cost-or-Net Realizable Value On December 31, 2020, Vale Inc. estimated the cost of inventory under the average cost method to

Recording a Loss in Applying Lower-of-Cost-or-Net Realizable Value

On December 31, 2020, Vale Inc. estimated the cost of inventory under the average cost method to be $70,400 and the net realizable value of inventory to be $68,000. 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 Name		Dr.	Cr.
a.	CashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained EarningsPrior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A
	CashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained EarningsPrior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A
b.	CashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained EarningsPrior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A
	CashAccounts ReceivableInventoryAllowance to Reduce Inventory to Net Realizable ValueAllowance to Reduce Inventory to Market ValueAccounts PayableBonus PayableEstimated Liability on Purchase CommitmentRetained EarningsRetained EarningsPrior Period AdjustmentSalesCost of Goods SoldCompensation ExpenseHolding Loss on InventoryEstimated Loss on Purchase CommitmentN/A