When Following U

question 66

Essay

When following U.S. GAAP, firms can use two methods to write down inventory to market, if needed.
Required:
1. What are the two methods called?
2. If there is a loss, describe the journal entry for both methods.
3. If there is a significant loss, which method is preferred? Why is this the case?

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Definitions:

Car Dealership

A business that specializes in the sale of new or used cars.

Office Supplies

Office supplies refer to various items and equipment used in offices or for professional purposes, such as stationery, computers, and furniture.

Expenses

Outflows or other using-up of assets or incurrences of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities.

Assets

Resources owned by a business or individual, which have economic value and can be used to meet debts or commitments.