Question

The Kingbird, Inc. purchased $9690 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies indicated only $1710 on hand. The adjusting entry that should be made by the company on June 30 is _________.

Answer 1

Answer:

Dr Supplies Impairment Expense $7980

Cr                         Supplies Inventory      $7980

Explanation:

According to IAS 2 Inventories, the impairment in the inventory values must be reflected as an expense and must be accounted for.

IAS 2 also says that the inventory must be recorded at lower of:

• Cost $9690
• Net Realizable Value $1710

This meas that writing down this inventory would require an adjusting entry of:

$9690 - $1710 = $7980

Impairment is debited with this amount and inventroy must be credited to reduce its value by $7980.

Dr Supplies Impairment Expense $7980

Cr                         Supplies Inventory      $7980