Lansang Building Supplies has recently been plagued with declining sales. The rate of inventory turnover has dropped, and some of the company's merchandise is gathering dust. At the same time, competition has forced Lansang Building Supplies to lower the selling prices of its inventory. It is now December 31, 2014, and the net realizable value of Lansang Building Supplies' ending inventory is $1,092 below what the business actually paid for the goods, which was $7,644. Before any adjustments at the end of the period, Lansang Building Supplies' Cost of Goods Sold account has a balance of $44,928.
What action should Lansang Building Supplies take in this situation, if any? Give any journal entry required. At what amount should Lansang Building Supplies report Inventory on the balance sheet? At what amount should the company report Cost of Goods Sold on the income statement? Discuss the accounting principle or concept that is most relevant to this situation.