Inventory Write-Down Calculator

✖Historical Cost is an accounting principle that states that assets should be recorded on the balance sheet at the original cost paid to acquire them.ⓘ Historical Cost [HC]			+10% -10%
✖Lower of Cost or Net Realizable Value means that inventory should be reported on the balance sheet at either its original cost or its net realizable value, whichever is lower.ⓘ Lower of Cost or Net Realizable Value [LCRV]			+10% -10%

✖Inventory Write Down is a reduction in the book value of inventory recorded on the balance sheet to reflect its impairment.ⓘ Inventory Write-Down [IWD]

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Formula

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Inventory Write-Down

Formula

`"IWD" = "HC"-"LCRV"`

Example

`"15000"="345000"-"330000"`

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Inventory Write-Down Solution

STEP 0: Pre-Calculation Summary

Formula Used

Inventory Write Down = Historical Cost-Lower of Cost or Net Realizable Value
IWD = HC-LCRV
This formula uses 3 Variables

Variables Used

Inventory Write Down - Inventory Write Down is a reduction in the book value of inventory recorded on the balance sheet to reflect its impairment.
Historical Cost - Historical Cost is an accounting principle that states that assets should be recorded on the balance sheet at the original cost paid to acquire them.
Lower of Cost or Net Realizable Value - Lower of Cost or Net Realizable Value means that inventory should be reported on the balance sheet at either its original cost or its net realizable value, whichever is lower.

STEP 1: Convert Input(s) to Base Unit

Historical Cost: 345000 --> No Conversion Required
Lower of Cost or Net Realizable Value: 330000 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

IWD = HC-LCRV --> 345000-330000

Evaluating ... ...

IWD = 15000

STEP 3: Convert Result to Output's Unit

15000 --> No Conversion Required

FINAL ANSWER

15000 <-- Inventory Write Down

(Calculation completed in 00.004 seconds)

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Credits

Created by Aashna

IGNOU (IGNOU), India

Aashna has created this Calculator and 100+ more calculators!

Verified by Keerthika Bathula

Indian Institute of Technology, Indian School of mines, Dhanbad (IIT ISM Dhanbad), Dhanbad

Keerthika Bathula has verified this Calculator and 50+ more calculators!

< 17 Asset Management Calculators

Seller's Discretionary Earnings

Go Seller Discretionary Earnings = Pre-Tax Income+Owner's Salary+Net Interest Expenses+Depreciation and Amortization+Discretionary Expenses+Non Recurring Expenses

Amortization of Intangible Assets

Go Amortization Expense = (Historical Cost of Intangible Asset-Residual Value)/Useful Life Assumption

Cash Available for Distribution

Go Cash Available for Distribution = Funds from Operations+Non-Recurring Items-Capital Expenditures

Residual Income

Go Residual Income = Operating Income-Minimum Required Rate of Return*Average Operating Assets

Net Capital Spending

Go Net Capital Spending = Ending Net Fixed Assets-Beginning Net Fixed Assets+Depreciation

Capital Structure

Go Capital Structure = Common Equity Weight+Debt Weight+Preferred Stock Weight

Allowance Method of Doubtful Accounts

Go Net Accounts Receivables = Gross Accounts Receivables-Allowance for Doubtful Accounts

Operating Working Capital

Go Operating Working Capital = Operating Current Assets-Operating Current Liabilities

Inventory Write-Down

Go Inventory Write Down = Historical Cost-Lower of Cost or Net Realizable Value

Net Realizable Value

Go Lower of Cost or Net Realizable Value = Expected Sale Price-Disposal Costs

Net Identifiable Assets

Go Net Identifiable Assets = Identifiable Assets-Total Liabilities

Expense Ratio

Go Expense Ratio = Annual Operating Expenses/Average Fund Assets

Inventory Days

Go Inventory Days = (Average Inventory/Cost Of Goods Sold)*365

Basic Earnings Power Ratio

Go Basic Earnings Power Ratio = Operating Income/Total Assets

Internal Growth Rate

Go Internal Growth Rate = Retention Ratio*Return on Assets

Depreciable Cost of Asset

Go Depreciable Cost = Purchase Cost-Salvage Value

Conversion Price

Go Conversion Price = Par Value/Conversion Ratio

Inventory Write-Down Formula

Inventory Write Down = Historical Cost-Lower of Cost or Net Realizable Value
IWD = HC-LCRV

What is Inventory Write Down?

An inventory write-down refers to the reduction in the value of a company's inventory to reflect its lower market value. This adjustment is necessary when the market value of the inventory falls below its book value or cost. Inventory write-downs are typically recorded as an expense on the income statement, which reduces the company's profit for the period.
The need for an inventory write-down can arise due to various reasons, such as:
Obsolete Inventory: Goods that are no longer in demand or have become outdated can lose their value over time.
Damaged or Defective Inventory: Inventory that is damaged, defective, or unsellable at its original price may need to be written down.
Excess Inventory: Holding excessive amounts of inventory can lead to write-downs if the company is unable to sell the inventory at the expected price.
Decline in Market Prices: Changes in market conditions or increased competition can cause the market value of inventory to decrease.

How to Calculate Inventory Write-Down?

Inventory Write-Down calculator uses Inventory Write Down = Historical Cost-Lower of Cost or Net Realizable Value to calculate the Inventory Write Down, The Inventory Write-Down occurs when a company reduces the value of its inventory below its original cost due to various reasons such as obsolescence, damage, or a decline in market value. Inventory Write Down is denoted by IWD symbol.

How to calculate Inventory Write-Down using this online calculator? To use this online calculator for Inventory Write-Down, enter Historical Cost (HC) & Lower of Cost or Net Realizable Value (LCRV) and hit the calculate button. Here is how the Inventory Write-Down calculation can be explained with given input values -> 15000 = 345000-330000.

FAQ

What is Inventory Write-Down?

The Inventory Write-Down occurs when a company reduces the value of its inventory below its original cost due to various reasons such as obsolescence, damage, or a decline in market value and is represented as IWD = HC-LCRV or Inventory Write Down = Historical Cost-Lower of Cost or Net Realizable Value. Historical Cost is an accounting principle that states that assets should be recorded on the balance sheet at the original cost paid to acquire them & Lower of Cost or Net Realizable Value means that inventory should be reported on the balance sheet at either its original cost or its net realizable value, whichever is lower.

How to calculate Inventory Write-Down?

The Inventory Write-Down occurs when a company reduces the value of its inventory below its original cost due to various reasons such as obsolescence, damage, or a decline in market value is calculated using Inventory Write Down = Historical Cost-Lower of Cost or Net Realizable Value. To calculate Inventory Write-Down, you need Historical Cost (HC) & Lower of Cost or Net Realizable Value (LCRV). With our tool, you need to enter the respective value for Historical Cost & Lower of Cost or Net Realizable Value and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

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