Cumberland Home Furniture has recently been plagued with lacklustre sales. The rate of inventory turnover has dropped, and some of the business's merchandise is gathering dust. At the same time, competition has forced the business to lower the selling prices of its inventory. It is now December 31, 2014. Assume the net realizable value of a Cumberland Home Furniture store's ending inventory is $1,100 below what Cumberland Home Furniture paid for the goods, which was $10,300. Before any adjustments at the end of the period, assume the store's Cost of Goods Sold account has a balance of $65,200.
Required
a. What action should Cumberland Home Furniture take in this situation, if any?
b. Give any journal entry required.
c. At what amount should Cumberland Home Furniture report Inventory on the balance sheet?
d. At what amount should the business report cost of goods sold on the income statement?
e. Discuss the accounting principle or concept that is most relevant to this situation.