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In: Accounting

What are the effects of the "unsellable" Inventory Write Offs on these accounts below? In other...

What are the effects of the "unsellable" Inventory Write Offs on these accounts below? In other words do they increase, decrease or have no effect? Explain your reasoning.

A. Accounts recievable

B. Cash

C. Accounts Payable

D. Inventory

E. Sales

F. Net Income

G. COGS

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Expert Solution

Solution:

“Unsellable” Inventory Write Offs : Unsellable inventory means inventory already purchased but have no use in business. When the any inventory is unsellable and these inventory when write offs than value of inventory is written down and expenses is booked for that amount as expenses.

Effect of this transaction on below accounts,

A -          Account Receivable        =             No Effect             - No impact on AR of sale of inventory

B -           Cash                                      =             No Effect             - Inventory W/o so no impact on Cash

C-            Account Payable              =             No Effect             - Amount is already paid so no impact on AP

D-           Inventory                            =             Decreases           -Inventory W/o so decrease from inventory

E-            Sales                                      =             No Effect             - W/o is not a sale so no impact on Sale

F-            Net Income                        =             Decreases           -W/o Debited to Revenue A/C so Decreases

G-           COGS                                    =             No Effect

Value of inventory is directly debited to revenue account so this have no effect of COGS.

ekkarill92 answered 2 years ago
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