At 30 June Kettle Creek wrote item A down from 12 to 10 and item C from 8 to 7, charging cost of goods sold. At 30 September item A’s NRV is 13 with 300 cases on hand, and item C’s NRV is 7.50 with 500 units on hand. Record the combined reversal.
At 30 June Kettle Creek wrote item A down from 12 to 10 and item C from 8 to 7, charging cost of goods sold. At 30 September item A’s NRV is 13 with 300 cases on hand, and item C’s NRV is 7.50 with 500 units on hand. Record the combined reversal.
Answer
Dr Inventory 850; Cr Cost of Goods Sold 850
Accounts - Inventory - Cost of Goods Sold - Gain on Inventory Recovery - Retained Earnings - Sales Revenue - Allowance for Inventory Decline A: MIN(13, 12) − 10 = 2 × 300 = 600 (capped at cost — NOT 3 × 300 = 900). C: MIN(7.50, 8) − 7 = $0.50 × 500 = 250. Total 850. Debit Inventory to restore the asset; credit Cost of Goods Sold because the write-down was charged there and IAS 2 treats the reversal as a reduction of that expense. Gain on Inventory Recovery is not an account either framework recognises; Retained Earnings is untouched by a current-period measurement; the allowance is not used in this course.
IAS 2 ¶33–34 (verified); Section 3031, converged with IAS 2 (verified-facts 2.5-4); L1 §7.4, §7.8