Question

Wildhorse Company began operations in 2019 and determined its ending inventory at cost and at lower-of-LIFO-cost-or-market at December 31, 2019, 2020 and 2021. This information is presented below.

		Cost		Lower-of-Cost-or-Market
December 31, 2019		$81,780		$66,740
December 31, 2020		94,000		92,120
December 31, 2021		91,180		91,180

Prepare the journal entries assuming that the inventory is recorded at market, and a perpetual inventory system (cost-of-goods-sold method) is used. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
12/31/19	enter an account title for the journal entry on December 31, 2016	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31, 2016	enter a debit amount	enter a credit amount
12/31/20	enter an account title for the journal entry on December 31, 2017	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31, 2017	enter a debit amount	enter a credit amount
12/31/21	enter an account title for the journal entry on December 31, 2018	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31, 2018	enter a debit amount	enter a credit amount

Answer 1

Date	Account Titles and Explanation	Debit	Credit
12/31/19	Cost of Goods Sold(81,780 – 66,740)	15,040
	Allowance to reduce Inventory to Net Realisable Value		15,040
12/31/20	Allowance to reduce Inventory to Net Realisable Value	13,160
	Cost of Goods Sold[15,040 – (94,000 – 92,120)]		13,160
12/31/21	Allowance to reduce Inventory to Net Realisable Value	1,880
	Cost of Goods Sold(15,040 – 13,160) – (91,180 – 91,180)		1,880