Use the following information for the following questions:
The following information is available for Anselmo Corporation's inventories:
December 31, 2019:
At cost: $\$ 585,000$
At lower of cost and net realizable value (NRV): $\$ 525,000$
December 31, 2020:
At cost:$\$780,000$
At lower of cost and net realizable value (NRV): $740,000 Anselmo uses a periodic inventory system and an allowance account to adjust its inventory from cost to the lower of cost and NRV.
-Anselmo's 2020 journal entry to adjust its inventory from cost to the lower of cost and net realizable value (NRV) will include a
A) debit of $40,000 to Loss on Inventory Due to Decline in NRV.
B) debit of $40,000 to Allowance to Reduce Inventory to NRV.
C) debit of $20,000 to Allowance to Reduce Inventory to NRV.
D) credit of $40,000 to Recovery of Loss Due to Decline in Inventory.

Question

Use the following information for the following questions:
The following information is available for Anselmo Corporation's inventories:
 December 31, 2019:
At cost: $\$ 585,000$
At lower of cost and net realizable value (NRV): $\$ 525,000$
December 31, 2020:
At cost:$\$780,000$
At lower of cost and net realizable value (NRV): $740,000 Anselmo uses a periodic inventory system and an allowance account to adjust its inventory from cost to the lower of cost and NRV.
-Anselmo's 2020 journal entry to adjust its inventory from cost to the lower of cost and net realizable value (NRV) will include a
A) debit of $40,000 to Loss on Inventory Due to Decline in NRV.
B) debit of $40,000 to Allowance to Reduce Inventory to NRV.
C) debit of $20,000 to Allowance to Reduce Inventory to NRV.
D) credit of $40,000 to Recovery of Loss Due to Decline in Inventory.

Quizplus · Accepted Answer

Anselmo's inventory at NRV decreased by $40,000 ($780,000 - $740,000), so they need to make an adjustment to record the new value. The allowance account is used to adjust the inventory value from its cost to the lower of cost and NRV. The journal entry to record this adjustment will include a debit to the allowance account and a credit to inventory. The debit amount should be equal to the decrease in inventory value, which is $40,000. Therefore, the correct choice is C - debit of $20,000 to Allowance to Reduce Inventory to NRV.

Use the Following Information for the Following Questions: the Following $585,000\$ 585,000$585,000

Use the Following Information for the Following Questions:
the Following $\$ 585,000$