An inventory loss from market decline of $900,000 occurred in April 2011. CD Com

Question

An inventory loss from market decline of $900,000 occurred in April 2011. CD Company recorded this loss in April 2011, after its March 31, 2011 quarterly report was issued. None of this loss was recovered by the end of the year. How should this loss be reflected in the quarterly income statements of CD Company?

                March 31        June 30            Sept 30            Dec 31

 

A)               0                    0                      0                 $900,000

 

B)               0                $300,000          $300,000         $300,000

C)             0                   $900,000          0                          0

D)         $225,000          $225,000         $225,000         $225,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Explanation / Answer

Option D is the correct answer. An inventory loss from market decline of $900,000 occurred in April 2011. CD Company recorded this loss in April 2011, after its March 31, 2011 quarterly report was issued this loss be reflected in the quarterly income statements of CD Company as follows: Inventory loss from market decline of         $900,000 occurred in April 2011. The loss was recorded from April. Quarterly means three months period.In a year there are 4 quarters. From April to june is 1st quarter period    $900,000/4 = $225,000 2nd quarter from july to september          $900,000/4 = $225,000 3rd quarter from October to December   $900,000/4 = $225,000 4th quarter from January to march           $900,000/4 = $225,000                                                                    

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