Using a periodic inventory system, Bertram Company records inventory at lower of cost or NRV using the allowance method. The end-of-the-year journal entries to adjust inventories would include

Question

Quizplus · Accepted Answer

C) is correct because in the lower of cost or net realizable value (NRV) approach using the allowance method, if the market value (NRV) is lower than the cost, the difference is recognized as a loss. This is done by debiting a loss account (Loss Due to Write-Down of Inventory) and crediting an allowance account (Allowance to Reduce Inventory to NRV) for the amount by which the inventory's cost exceeds its market value.

Using a Periodic Inventory System, Bertram Company Records Inventory at Lower