What should it include, in any? 2. The following data relates to inventory value

Question

What should it include, in any?

2. The following data relates to inventory values for Lawrence Corp. for 2015 through 2017: Inventory Value on 12/31/2015 Inventory Value on 12/31/2016 Inventory Value on 12/31/2017 at Cost $200,000 $225,000 $250,000 at Net Realizable Value $200,000 $215,000 $260,000 If Lawrence uses a Loss account and an Allowance to Reduce Inventory to NRV account to record net realizable value in place of cost, the 2017 adjusting journal entry to reflect the application of the Iower of Cost or Net Realizable Value rule should include:

Explanation / Answer

Answer:

Journal entry for 2017-No entry is required for recording the increase in market value since U.S. GAAP does not permit a write-up of write-downs reported in a prior year, even if the value of the inventory has recovered

The Allowance to reduce inventory to CLM accont is a contra asset account in the balance sheet which is offset against the inventory account to reduce the value of inventory to lower of Cost or MArket value.

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