At 31 December Bramble Lane Outfitters Ltd. tests inventory item by item: packs cost 4,200, NRV 3,900; headlamps cost 2,600, NRV 3,100; gaiters cost 1,500, NRV 1,350. Record the write-down to the lower of cost and NRV.
At 31 December Bramble Lane Outfitters Ltd. tests inventory item by item: packs cost 4,200, NRV 3,900; headlamps cost 2,600, NRV 3,100; gaiters cost 1,500, NRV 1,350. Record the write-down to the lower of cost and NRV.
Answer
Dr Cost of Goods Sold 450; Cr Inventory 450
Accounts - Cost of Goods Sold - Inventory - Loss on Inventory Write-down - Accounts Payable - Sales Revenue Item by item: packs down 300, headlamps nil (NRV above cost — never written UP), gaiters down 150 = **450**. **Inventory** (credit) is reduced to 7,850 and the expense goes to **Cost of Goods Sold** (debit), the default. The trap is 0 from testing the group in total (8,300 vs 8,350). A separate Loss on Inventory Write-down line is acceptable but not the expected answer here.
Lyryx Intermediate FA Vol 1 §7.3.3 (LCNRV), §7.5 (errors); Hermanson Vol 1 ch 7 (inventory errors, LCNRV, turnover); Dauderis & Annand §6.3–6.5; OpenStax Accounting Vol 1 §10.4; verified-facts.md V5 (s.3031 — NRV, write-down, reversal limited to the original write-down) (concept map H13–H16)