Question

Harper Co. incurred an apparently permanent inventory loss from market decline of $840,000 during June year 1. What amount of the inventory loss should be recognized in Harper’s quarterly income statement for the 3 months ended June 30, year 1?

A. $840,000
B. $280,000
C. $210,000
D. $420,000

Answer 1

$840,000

Step-by-step explanation:

The international Accounting Standard 2 postulates that cost be adjusted to the lower of Cost and Net Realizable Value. Hence the value of Stock to be shown has to reflect the FULL REDUCTION IN VALUE to reflect the Net Realizable Value.

Furthermore the transaction occurred in June and must be included in June's financial statement. It is not to be apportioned as the drop in value did not have across periods but in one particular period.