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Postby gitimamishra01 » Tue May 03, 2016 8:32 pm

The rule under U.S GAAP when writing down inventory is if cost is more than replacement cost( restricted b/w NRV & NRV minus profits)
if replacement cost is not within these limits, are NRV and NR- profit margin used.
here replacemment cost is well within the limits, hence why is 9800 taken to write down inventory.
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Postby edupristine » Tue May 24, 2016 7:51 am

Hi Gitima

First option is correct because here 9800 taken as write down inventory. which is under the limits.inventory is valued at lower cost.
You should not spread the write-down over future periods, because that would imply that some benefit is accruing to your company over the write-down period.inventory involves charging a certain amount of the inventory asset to expense in the current period.

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