Assume that inventory originally costing the business $35,000 is damaged and has an estimated market value of around $7,000. Jake is unsure of how to report this inventory on the balance sheet. Explain how Jake should report the inventory in accordance with GAAP. Refer to at least one specific accounting rule or principle in your explanation.

Assume that inventory originally costing the business $35,000 is damaged and has an estimated market value of around $7,000. Jake is unsure of how to report this inventory on the balance sheet. Explain how Jake should report the inventory in accordance with GAAP. Refer to at least one specific accounting rule or principle in your explanation.

you should have attempted the question yourself

The methodology is to write down the inventory to its estimated market value.. The GAAP requires inventory to be valued at the lower of cost or market value with a note to that effect in the accounts