At the year end, Cobble Co holds 2,000 units of a product that cost $50 per unit. The product is expected to sell for $60 per unit, but $15 per unit will be incurred on completion and selling costs. By how much should inventory be written down?

Correct answer: B) $10,000

Explanation

NRV per unit = $60 - $15 = $45, which is below cost of $50, so inventory must be written down by $5 per unit. Write-down = 2,000 x $5 = $10,000. Ignoring costs to complete and sell gives no write-down; $20,000 is the gross profit (2,000 x $10) and $30,000 is the total costs to sell.