Worked-example setupScope and assumptions
- Cedar Trail is fictional, and the owned population, comparison amount, contract enforceability, cancellation, hedge status, market evidence, and delivery are supplied.
- The purchase commitment is within ASC 330-10-35-17 and has no other recoverability or measurement adjustment.
- Period
- One reporting date followed by delivery
- Units
- US dollars
- Rounding
- Display dollars to cents
Record the owned inventory loss
Cedar owns inventory costing $10,000. Its applicable test produces a supported
$8,800 comparison amount. Debit inventory loss for $1,200 and credit inventory
or the approved valuation account for $1,200. The rollforward is $10,000 − $1,200 = $8,800.
Keep the future contract separate
A separate firm, uncancelable, unhedged commitment requires Cedar to buy 1,000 units for $12 each. Control has not transferred. A supported reporting-date comparison amount is $10.50 per unit, and no other adjustment applies. Under ASC 330-10-35-17, record the $1,500 net loss: debit loss and credit purchase commitment liability. Do not record inventory before delivery.
When the goods transfer at the contracted $12,000, debit inventory for $10,500, debit the commitment liability for $1,500, and credit accounts payable for $12,000. This releases the prior liability without recording the loss twice.
Complete the independent Northstar write-down and commitment task.
Verified calculation · scoped sums
The curriculum loader recomputed this example before it entered the site build. Expand any structured input to inspect the stated facts.
- amounts
- 6 fields
Inspect data
{
"commitment_liability_release": 1500,
"contract_comparison_reduction": -10500,
"contract_cost": 12000,
"delivered_inventory": 10500,
"owned_comparison_reduction": -8800,
"owned_cost": 10000
}- totals
- 3 fields
Inspect data
{
"commitment_loss": [
"contract_cost",
"contract_comparison_reduction"
],
"delivery_consideration": [
"delivered_inventory",
"commitment_liability_release"
],
"owned_write_down": [
"owned_cost",
"owned_comparison_reduction"
]
}Recomputed result
| Measure | Value |
|---|---|
| commitment loss | 1,500 |
| delivery consideration | 12,000 |
| owned write down | 1,200 |