Inventory Writedown Allowance Method

When recording an inventory writedown, companies can credit the Inventory account directly or instead credit an allowance account. For example, if a company with $600 of inventory recorded a $175 writedown per the lower-of-cost-or-net-realizable-value rule, the company could debit Cost of Goods Sold (or Loss on Decline in Value of Inventory) and then credit Allowance to Reduce Inventory to Net Realizable Value for $175.

The Balance Sheet would then show:
Inventory, $600
Minus: Allowance to Reduce Inventory to Net Realizable Value, $175
Inventory, net $425
—
Edspira is the creation of Michael McLaughlin, an award-winning professor who went from teenage homelessness to a PhD. Edspira’s mission is to make a high-quality business education accessible to all people.
—
SUBSCRIBE FOR A FREE 53-PAGE GUIDE TO THE FINANCIAL STATEMENTS, PLUS:
• A 23-PAGE GUIDE TO MANAGERIAL ACCOUNTING
• A 44-PAGE GUIDE TO U.S. TAXATION
• A 75-PAGE GUIDE TO FINANCIAL STATEMENT ANALYSIS
• MANY MORE FREE PDF GUIDES
http://eepurl.com/dIaa5z
—

GET CERTIFIED IN FINANCIAL STATEMENT ANALYSIS, IFRS 16, AND ASSET-LIABILITY MANAGEMENT
https://edspira.thinkific.com
—
LISTEN TO THE SCHEME PODCAST
Apple Podcasts: https://podcasts.apple.com/us/podcast...
Spotify: https://open.spotify.com/show/4WaNTqV...
Website: https://www.edspira.com/podcast-2/
—
GET TAX TIPS ON TIKTOK
  / prof_mclaughlin  
—
ACCESS INDEX OF VIDEOS
https://www.edspira.com/index
—
CONNECT WITH EDSPIRA
Facebook:   / edspira  
Instagram:   / edspiradotcom  
LinkedIn:   / edspira  
—
CONNECT WITH MICHAEL
Twitter:   / prof_mclaughlin  
LinkedIn:   / prof-michael-mclaughlin  
—
ABOUT EDSPIRA AND ITS CREATOR
https://www.edspira.com/about/