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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Describe the two approaches to recording the reduction of inventory.

To determine

Explain the two approaches of recording the reduction of inventory.

Explanation

Inventory Write-Downs: If the utilizing capacity of inventory by the company drops down below the acquisition cost of inventory, the inventory write-downs occur.

The following are the two situations for the inventory write-downs:

  • When the inventory is damaged or is in non-salable state
  • When the market value of inventory has dropped below the acquisition cost

...

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