Suppose management estimated the market valuation of some obsolete inventory at $ 99,000; this inventory was recorded at $ 120,000, which resulted in recognizing a loss of $ 21,000. The auditors obtained the following information: The inventory in question could be sold for an amount between $ 78,000 and $ 92,000. The costs of advertising and shipping could range from $ 5,000 to $ 7,000.

Required:

a. Would you propose an audit adjustment to the management estimate? Prepare the appropriate accounting entry.

b. If management’s estimate of inventory market (lower than cost) had been $ 80,000, would you propose an audit adjustment? Prepare the appropriate accounting entry.