Hartley Home Furniture has had poor sales in the last year. The rate of inventory turnover has dropped, and some of the business’s merchandise is gathering dust. At the same time, competition has forced the business to lower the selling prices of its inventory. It is now December 31, 2023. Assume the net realizable value of a Hartley Home Furniture tore’s ending inventory is $1,500 below what Hartley Home Furniture paid for the goods, which was $10,300. Before any adjustments at the end of the period, assume the store’s Cost of Goods Sold account has a balance of $65,200.

Required

1. What action should Hartley Home Furniture take in this situation, if any?

2. What account is used to record the write-down? Is it debited or credited?

3. At what amount should Hartley Home Furniture report inventory on the balance sheet?

4. At what amount should the business report cost of goods sold on the income statement?

5. Discuss the accounting principle, concept, or constraint that is most relevant to this situation.