Kettle Creek holds items A, B and C (total cost 14,600; total NRV 14,200) and, because they are one product line that cannot practicably be evaluated separately, applies LCNRV on a group basis. Write-downs are charged to cost of goods sold. Record the group write-down at 30 June.
Kettle Creek holds items A, B and C (total cost 14,600; total NRV 14,200) and, because they are one product line that cannot practicably be evaluated separately, applies LCNRV on a group basis. Write-downs are charged to cost of goods sold. Record the group write-down at 30 June.
Answer
Dr Cost of Goods Sold 400; Cr Inventory 400
Accounts - Cost of Goods Sold - Inventory - Loss on Inventory Write-down - Allowance for Inventory Decline - Gain on Inventory Recovery - Retained Earnings Group basis: total cost 14,600 − total NRV 14,200 = 400, because B’s 1,000 surplus offsets $1,000 of A’s and C’s shortfalls inside the group total. Same accounts as an item write-down — Dr Cost of Goods Sold, Cr Inventory — only the amount changes. Loss on Inventory Write-down is the separate-line presentation used only when stated; the allowance is a contra-asset this course never credits; a gain account never appears on a write-down; Retained Earnings is for prior-period corrections, not a current measurement.
LI §6.3 (the item-vs-group table); L1 §7.3.3