Hi Does anyone know why in part 3 of section 5 we deduct the difference between the inventory allowance as opposed to the actual inventory allowance. In the book, the answer is 10,016 +685 -195 (tax, i get this part) = 10506 why isn’t it 10016 +3522 -1004 =12534 I understand that in part 2 we use the difference between 08-07 and 07-06 but that is because it says that the change to the allowance in inventory is reflected in the cost of sales but then why is that so in part 3? Part 3 discusses inventory write-downs not a change in inventory allowance. I’m just a little confused. Thanks in advance.
Now that I’m on part 4, i’m even more confused wouldn’t it be 10,016 +685 +822 -(0.285 X 1507) = 11094 as opposed to 10,016 +3522 -1004 = 12,534 If the section in part 3 uses the write down as the difference between the allowance in 08 and 07 then if we are reversing all previous write downs, wouldn’t it be the same of the diff in 08-07 and 07-06?