A clothing store sells seasonal dresses. As the season draws near the close, the store sells the dresses at 10% below the cost because carrying the dresses costs the store in terms of storage space and funds tied up in the inventories. The balance date is 31 December 2019. Summer ends in February. On 31 December 2019, the store has 10,000 dresses. Based on its past experiences, it expects to sell 20% of these dresses at 10% below cost. The remaining 80% of these dresses are expected to be sold at the normal sales price, which is 15% of the cost. Each dress costs $15. 

a) Should the clothing store recognize an inventory write-down loss? Explain in detail. 

b) Explain whether inventory write-down loss is useful to users.

Answer rating: 100% (QA)

aInventory write down is the process of writing down the value of the inventory when its fair market value decreases below book value This process is ... View the full answer