An inventory loss from market decline of $1,200,000 occurred in April 2014.Discus Company recorded this loss in April 2014 after its March 31,2014,quarterly report was issued.None of this loss was recovered by the end of the year.How should this loss be reflected in the quarterly income statements of Discus Company? Three months ended (2014):
March 31 June 30 September 30 December 31

Question

Quizplus · Accepted Answer

The inventory loss should be recorded in the period in which it occurred, which is April 2014. Therefore, it should not be reflected in the income statements for the quarter ended March 31, 2014 or any subsequent quarter of the year. As none of the loss was recovered by the end of the year, it should be reflected as a one-time loss in the income statement for the quarter ended June 30, 2014, which is the next quarterly report after the occurrence of the loss. Option C reflects this treatment correctly.

An Inventory Loss from Market Decline of $1,200,000 Occurred in April