Three dissimilar inventory items at year-end: X, 100 units at cost 50 and NRV 44; Y, 300 units at cost 12 and NRV 15; Z, 200 units at cost 30 and NRV 27. Compute the total write-down on an item-by-item basis and, for comparison, on a group basis (total cost versus total NRV).
Three dissimilar inventory items at year-end: X, 100 units at cost 50 and NRV 44; Y, 300 units at cost 12 and NRV 15; Z, 200 units at cost 30 and NRV 27. Compute the total write-down on an item-by-item basis and, for comparison, on a group basis (total cost versus total NRV).
Answer
Item basis → 1200 · Group basis → 300
Cells - Item basis · ±0 - Group basis · ±0 Item basis: X 100 × (50 − 44) = 600; Y none (NRV above cost, no write-up); Z 200 × (30 − 27) = 600; total 1,200. Group basis: total cost 5,000 + 3,600 + 6,000 = 14,600 vs total NRV 4,400 + 4,500 + 5,400 = 14,300; write-down 300. The item basis is required for dissimilar items; grouping lets Y’s 900 of unrealised gain offset the others.
Lyryx IFA Vol 1 §7.3.3, §10.4; synthesis of Modules 1–6