The Bradford Company was recently required to record an inventory write-down of $5,200 because the market value of its inventory was less than cost.Assuming the amount of the write-down is not material (the total inventory was over $9,750,000),which of the following is the appropriate journal entry?

Question

The Bradford Company was recently required to record an inventory write-down of $5,200 because the market value of its inventory was less than cost.Assuming the amount of the write-down is not material (the total inventory was over $9,750,000),which of the following is the appropriate journal entry?
The Bradford Company was recently required to record an inventory write-down of $5,200 because the market value of its inventory was less than cost.Assuming the amount of the write-down is not material (the total inventory was over $9,750,000),which of the following is the appropriate journal entry?

Quizplus · Accepted Answer

The appropriate journal entry for the inventory write-down is to debit Cost of Goods Sold and credit Inventory for the amount of the write-down.

B. Debit Cost of Goods Sold $5,200 and credit Inventory $5,200. This correctly reflects the decrease in the value of inventory and its impact on the company's cost of goods sold.

A. Debit Inventory $5,200 and credit Cost of Goods Sold $5,200. This would be incorrect, as it would increase inventory rather than decrease it, and decrease cost of goods sold instead of increasing it.

C. Debit Loss on Inventory Write-Down $5,200 and credit Inventory $5,200. This would also be incorrect, as it does not properly reflect the impact of the write-down on the company's cost of goods sold.

The Bradford Company Was Recently Required to Record an Inventory