AC300 Unit 8 Inventory NRV Write-Down Problem Example

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A kit zoom lens that cost $310 and would net only $295 drives this AC300 Unit 8 inventory costing problem. Purdue Global AC 300, Intermediate Accounting I, asks BS in Accounting students to cost year-end inventory and then test it against net realizable value. Lumen & Lens, a composite camera shop, prices a camera body, two lenses and a tripod from their first in, first out purchase layers, for a total of $31,680. Each item is tested on its own figures. Only the kit lens fails, after a newer model cut its price, and the shop writes it down by $390. The same lens is then run through the older lower of cost or market rule, where replacement cost of $285 produces a $650 write-down, and the paper explains the gap.

CourseAC300 Intermediate Accounting I
UnitUnit 8
Paper typeInventory costing problem
LengthAbout 620 words, 5 pages double-spaced
FormatAPA 7 student paper
SchoolPurdue University Global
ProgramBS in Accounting
UpdatedOctober 2026

Free sample paper for AC300 Unit 8

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A Lens That Costs $310 and Nets $295: A Unit 8 Inventory Costing and Net Realizable Value Problem for a Camera Shop

[Student Name]

Purdue University Global

AC300: Intermediate Accounting I

Unit 8 Inventory Costing Problem

[Instructor Name]

[Date]

Lumen & Lens Camera Shop, its stock, prices and costs are composite; the standard and textbook cited are real.

What this part is doingStating the failing item and both values in the lead shows the problem's key comparison before the computation.
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Step 1: Cost From Purchase Layers, First In, First Out

1. Mirrorless camera body, 12 on hand: 8 from the November purchase at $1,240 and 4 from September at $1,210. Cost $9,920 plus $4,840, or $14,760, an average of $1,230.

2. Kit zoom lens, 26 on hand, all from the October purchase at $310. Cost $8,060.

3. Portrait prime lens, 15 on hand at $420. Cost $6,300.

4. Travel tripod, 40 on hand at $64. Cost $2,560.

Total cost: $31,680.

Step 2: Net Realizable Value, Item by Item

Net realizable value starts from the price the shop expects to get and subtracts the costs it can foresee in finishing, selling and delivering the item (Financial Accounting Standards Board, 2015). For the shop, selling costs are card fees and the commissions paid to floor staff.

1. Camera body: price $1,599, selling costs $80, NRV $1,519. Cost $1,230. No write-down.

2. Kit zoom lens: price $329, cut from $399 after the manufacturer released a newer lens; selling costs $34; NRV $295. Cost $310. Fails by $15 a unit.

3. Prime lens: price $599, selling costs $39, NRV $560. Cost $420. No write-down.

4. Tripod: price $95, selling costs $7, NRV $88. Cost $64. No write-down.

Step 3: Write-Down

Kit zoom lens: $15 times 26 units equals $390. Entry: Cost of Goods Sold, debit $390; Inventory, credit $390. Some companies use a separate loss account; the shop reports the amount within cost of goods sold because it is not material. Carrying amount after the test: $31,680 minus $390 equals $31,290.

The test is applied item by item, so the camera body's $289 cushion per unit cannot be used to offset the lens's shortfall; each item stands or falls on its own figures.

What this part is doingThe highlighted sentence explains why the lens is written down even though total inventory value exceeds total cost, the point graders check.
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Step 4: The Older Rule, Lower of Cost or Market

Under the rule that dates to Accounting Research Bulletin No. 43 (Committee on Accounting Procedure, 1953), which applied to all inventory before 2017 and still governs inventory measured by last in, first out or the retail method, market meant replacement cost, capped above at net realizable value and held up below at net realizable value minus the shop's usual markup (Kieso et al., 2019). For the kit lens: replacement cost from the distributor today is $285. Ceiling: $295. Floor: $295 less a normal margin of $49, or $246. Replacement cost of $285 falls between the two, so market is $285. Lower of cost, $310, or market, $285: $285. Write-down: $25 times 26 units equals $650. The other three items pass the older test as well, because their replacement costs remain above cost.

Comparing the Two Rules

The current rule writes the lens down by $390; the older rule by $650. The difference arises because replacement cost has fallen further than selling price. The simplified rule was adopted partly because comparing cost with what the shop can actually realize is easier to apply and to audit than the three-way market test (Financial Accounting Standards Board, 2015).

Disclosure

The notes state the cost method, first in, first out, and that each item is carried at cost or, where lower, at its net realizable value, with the amount of the write-down if material. If the newer lens model continues to pull prices down, the shop should test again at the next quarter-end rather than wait for year end.

What this part is doingEnding with disclosure and a follow-up test shows awareness that valuation is ongoing, not a once-a-year exercise.
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References

Committee on Accounting Procedure. (1953). Restatement and revision of accounting research bulletins (Accounting Research Bulletin No. 43). American Institute of Accountants.

Financial Accounting Standards Board. (2015). Inventory (Topic 330): Simplifying the measurement of inventory (Accounting Standards Update No. 2015-11). https://www.fasb.org

Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate accounting (17th ed.). Wiley.

The Purdue Global AC300 Unit 8 instructions

Unit 8 of AC300 covers inventory valuation, and the problem gives on-hand quantities, purchase layers and price information at year end. Cost each item using the method the prompt names, showing which layers remain. Compute net realizable value for each item as expected selling price less foreseeable selling and completion costs. Compare cost with net realizable value item by item unless the prompt allows grouping, and record any write-down. Some sections also ask for the older lower of cost or market test, which still applies to inventory under last in, first out or the retail method; if so, set the ceiling and floor and pick the middle value. Compare the two results and explain why they differ. Close with what the notes should disclose. Number each step so the grader can follow it. Cite the 2015 update and ARB 43 in APA 7.

Inside the AC300 Unit 8 example

Step 1 costs the camera bodies from two layers, 8 at $1,240 and 4 at $1,210, and the other items from single layers, for $31,680 in all. Step 2 lists price, selling costs and net realizable value for each item, noting that the kit lens price fell from $399 to $329. Step 3 writes the lens down by $15 a unit, records the entry to cost of goods sold, and shows the carrying amount of $31,290. The highlighted sentence explains why the camera body's cushion cannot offset the lens. Step 4 applies the 1953 rule with a ceiling of $295, a floor of $246 and replacement cost of $285, yielding a larger write-down. A comparison section ties the difference to replacement cost falling faster than selling price. The disclosure section names the cost method and recommends a quarter-end retest.

Where the points sit in the AC300 Unit 8 rubric

This AC300 problem is graded mostly on the computations: correct layer costs, correct net realizable values and the right write-down amount. Errors in the purchase layers change everything after them, so the first step is checked closely. Applying the test item by item, when the facts call for it, is a scoring point in itself. The entry must reduce inventory and charge cost of goods sold or a loss account. If the older rule is required, the ceiling, floor and choice of market are each worth credit. Explaining why the two rules give different answers shows understanding beyond procedure. A disclosure paragraph and a note on retesting add professional judgment. Clear numbered steps make partial credit possible when one figure slips. Purdue Global instructors also expect APA 7 citations to the inventory guidance on any written explanation.

Common AC300 Unit 8 mistakes, and how to avoid them

Inventory problems slip most often at net realizable value: students compare cost with selling price and forget the selling costs. Others apply the test to the total inventory and let a profitable item hide a loss on another. The older rule is sometimes used for first in, first out inventory, which the 2015 update moved to net realizable value. When the older rule is required, the floor is computed with the wrong margin or the middle value is chosen incorrectly. Some papers record the write-down as a reduction of sales. Others reverse it the next year, which US GAAP does not allow. Layer costs are averaged when the method is first in, first out. If your inventory problem uses weighted average, the retail method or dollar-value last in, first out, our writers can work it through step by step.

Get an AC300 Unit 8 example written to your instructions

Item by item or in total? The Unit 8 test depends on the instructions, so mention which applies when sending the purchase lots, units on hand, selling prices, costs to sell and cost flow method, along with the rubric. The priced and tested inventory, entry included, arrives within 24-48h, free as a first custom sample. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.

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AC300 Unit 8 questions, answered

Why does the test differ between FIFO and LIFO inventories?

Because the FASB simplified the rule in 2015 only for inventory measured by first in, first out or average cost, which now uses lower of cost and net realizable value. Inventory under last in, first out or the retail method still uses lower of cost or market, where market is the middle of replacement cost, a ceiling and a floor. The problem's cost method decides which test applies.

Can the write-down go to a separate loss account instead of cost of goods sold?

Yes, either is acceptable, and some AC300 problems ask for a loss account so the decline is visible on the income statement. Charging cost of goods sold is simpler and common when the amount is small. The sample uses the account the problem names, and when none is named it charges cost of goods sold and names that choice.

Where can I find a free AC300 Unit 8 sample paper?

This page gives a complete AC300 Unit 8 inventory costing problem for a composite camera shop, with FIFO layer costs, an item-by-item net realizable value test, a $390 write-down, the older market test and APA 7 references.

Why is the write-down larger under the older rule in AC300 Unit 8?

Market under that rule was replacement cost, $285, which had fallen further than the lens's net realizable value of $295. Cost of $310 less $285 gives $25 a unit, or $650 for 26 lenses.

Can a written-down lens be marked back up in the AC300 Unit 8 sample?

No. Under US GAAP the reduced amount becomes the lens's new cost, so a later price recovery shows only as a higher margin when the lenses sell. International standards allow a reversal.