Le Château Inc. manufactures and sells fashion apparel, accessories, and footwear at various retail locations across Canada. Its annual report for the year ended January 28, 2012, included the following note:
The cost of inventory recognized as an expense and included in cost of sales for the year ended January 28, 2012, is $ 96.1 million ( 2011, $ 98.3 million), including write- downs recorded of $ 6.9 million ( 2011, $ 6.7 million), as a result of net realizable value being lower than cost. No inventory write- downs recognized in prior periods were reversed.
1. Explain each of the inventory items listed in the note.
2. Assume that the write- down relates to the values of specific items of raw materials. Prepare the journal entry to record the write- down of inventory costs. Le Château uses a perpetual inventory system.
3. Assume that some of the raw materials that were written down on January 28, 2012, were not used for production purposes by January 27, 2013, the end of its 2013 fiscal year. The inventory items that were written down had an original cost of $ 2.3 million, and their net realizable value was $ 1.7 million. Changes in market conditions increased the net realizable value of these items to $ 2.4 million, which exceeded their original cost. How would this information be reflected in Le Château’s statement of earnings for fiscal year 2013 and its statement of financial position as at January 27, 2013? Explain.

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