Waterway uses LIFO inventory costing. At January 1, 2020, inventory was $277,680 at both cost and market value. At December 31, 2020, the inventory was $353,340 at cost and $332,280 at market value. Prepare the necessary December 31 entry under (a) the cost-of-goods-sold method and (b) loss method

a)

Dr Cost of Goods Sold $21,060

Cr Allowance to Reduce Inventory to Market

$21,060

b)

Dr Loss Due to Market Decline of Inventory $21,060

Cr Allowance to Reduce Inventory to Market $21,060

Explanation:

Waterway uses LIFO inventory costing as at January 1, 2020

a)

Dr Cost of Goods Sold $21,060

Cr Allowance to Reduce Inventory to Market

$21,060

($353,340 – $332,280)

b)

Dr Loss Due to Market Decline of Inventory $21,060

Cr Allowance to Reduce Inventory to Market $21,060

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