The cost of Piper Music Inc.'s inventory at December 31, 2011, is $54,700. Its net realizable value on the same date is $52,500.

(a) Prepare the adjusting journal entry required, if any, to record the decline in value of the inventory, assuming Piper Music uses a perpetual inventory system.

(b) If Piper Music has the same inventory on hand at December 31, 2012, with a net realizable value of $55,000, what amount should it report its inventory at on that date?