At the end of a reporting period, Gaston Corporation determines that its ending inventory has a cost of $6,500 and a net realizable value of $5,800. The adjustment to write down inventory to net realizable value would include:

The answer is given below;

Explanation:

Cost of inventory                        $6,500

Net realizable Value                    ($5,800)

Loss on inventory                         $700

The journal entry for this will be;

Net Income                Dr.$700

Inventory                    Cr.$700

This decrease in income will ultimately impact retained earnings in balance and decrease in inventory will decrease total assets in balance sheet.

Net realizable value is defined as expected selling price less expected selling expenses.

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