One hundred units of inventory on hand at the end of the year are recorded at their cost of $10 each using LIFO. Current net realisable value is $8.00. How would the Cost of sales be affected by the adjusting entry needed under lower- of- cost- and- net- realisable- value?

Question

Quizplus · Accepted Answer

The inventory needs to be written down to its net realizable value, which is $8 per unit. The write-down is $2 per unit for 100 units, totaling $200. This increases the cost of sales by $200.

One Hundred Units of Inventory on Hand at the End