Question

Determine which of the following statements are correct regarding damaged or obsolete goods. (Check all that apply.)

A loss in value is reported in the period when goods are damaged or become obsolete.
If damaged goods can be sold at a reduced price, they are included in inventory.
Damaged goods are not included in inventory if they cannot be sold.
Damaged goods are included in inventory at their net realizable value

Answer 1

Damaged or obsolete goods are accounted for by reporting a loss in their value during the period they become damaged or obsolete, including them in inventory at a reduced price if they can still be sold, and at net realizable value if damaged but saleable.

Step-by-step explanation:

The student has asked about the correct handling of damaged or obsolete goods in terms of inventory accounting and recognition of losses. The correct statements regarding this issue are:

• A loss in value is reported in the period when goods are damaged or become obsolete.
• If damaged goods can be sold at a reduced price, they are included in inventory.
• Damaged goods are not included in inventory if they cannot be sold.
• Damaged goods are included in inventory at their net realizable value.

This reflects the need for businesses to evaluate their inventory and recognize losses to provide a true and fair view of their financial position.

Answer 2

Damaged goods affect the calculation of GDP and a company's inventory based on whether they can be sold or not. If they can be sold at a reduced price, they are included at net realizable value; if unsellable, they are excluded.

Step-by-step explanation:

Correct statements regarding damaged or obsolete goods are:

• A loss in value is reported in the period when goods are damaged or become obsolete.
• If damaged goods can be sold at a reduced price, they are included in inventory.
• Damaged goods are not included in inventory if they cannot be sold.
• Damaged goods are included in inventory at their net realizable value.

These principles are part of the accounting and inventory management practices. Businesses take these factors into account when determining their net income and inventory value, which both contribute to calculating the Gross Domestic Product (GDP). Damaged goods that can be sold, even at a lower price, still hold some value and must therefore be accounted for in the company's inventory. However, if these goods cannot be sold, they are excluded from inventory as they no longer contribute to the potential revenue of the business.