Question
In: Accounting
What are the journal entries to record the impairment of inventory?
What are the journal entries to record the impairment of inventory?
Solutions
Expert Solution
Solution:
Impairment of Inventory means the inventory is estimated to be worth less than the value currently shown in accounting records. Impairment of Inventory is the process of reducing the value of inventory of a business. It is also known as Inventory Write Down.
The value of inventory is required to be reduced.
If inventory write downs are not significant, the journal entry is as follows:
|
Account Titles |
Debit |
Credit |
|
Cost of Goods Sold |
XX |
|
|
Inventory |
XX |
If inventory write downs are significant, the journal entry is as follows:
|
Account Titles |
Debit |
Credit |
|
Inventory Write Downs (Expense) |
XX |
|
|
Inventory |
XX |
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