Shake Company's Inventory Experienced a Decline in Value Necessitating a Write-Down

question 49

Multiple Choice

Shake Company's inventory experienced a decline in value necessitating a write-down to lower of cost or net realizable value (LCNRV) of €230,000. This amount is material to Shake's income statement and the company follows IFRS. Where should Shake Company report this decline in value according to IFRS?
I. As a loss on the income statement.
II. As a separate component of other comprehensive income on the statement of comprehensive income.
III. As part of cost of goods sold on the income statement.

• A) Shake must use I.
• B) Shake must use I, II or III.
• C) Shake must use I, or III.
• D) Shake must use III.

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Definitions:

Subagent

An agent appointed by another agent with the original principal's authorization, typically to help perform some duty or function.

Apparent Authority

The appearance or assumption of authority based on the actions or representations of the principal.

Misrepresented Warranty

A false or misleading statement about the condition or functionality of a product that can lead to a breach of warranty claim.

Respondeat Superior

A legal doctrine that holds an employer liable for the actions of an employee when the actions occur within the scope of employment.