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Year 6 is the first year of operation for Bob the Builder. The following information is available for Bob's inventories:
December 31, Year 6:
At cost: $585,000;
At lower of cost and net realizable value (NRV): $525,000
December 31, Year 7:
At cost: $780,000;
At lower of cost and net realizable value (NRV): $740,000
Question 1: Prepare Bob's Year 7 journal entry to adjust its inventory from cost to the lower of cost and NRV, assuming the allowance method is being used.
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