ACC 332 Lecture Notes - Lecture 3: Write-Off, List Of Fables Characters, Disclose
Document Summary
Circumstances arise after purchase or production of inventory that indicate the company will sell inventory for less than cost. Purchase inventory > inventory damage, physical deterioration, obsolescence, changes in price levels. Gaap requires that companies evaluate their unsold inventory at the end of each reporting period. When the expected bene t of unsold inventory is estimated to have fallen below cost, companies must make an adjusting entry known as inventory write-down to reduce inventory and net income for the period. The approach chosen by a company depends on which inventory costing method it uses. The nancial statements e ects are the same. The di erence is the amount of the inventory write down. Lower of cost or net realizable value (lcnrv) Fifo, average cost, or any other method besides lifo or the retail inventory method. Lower of cost or market (lcm) lifo or retail inventory method. Inventory write-downs: reduce reported inventory, reduce net income, reduce reported inventory, reduce net income.
