A retail company, Walmart, reports inventory at the lower of cost or market. For the year ended December 31, 2023, the following information is available:

• Cost of inventory: $1,200,000
• Market value of inventory: $1,000,000
• Sales: $5,000,000
• Cost of Goods Sold: $3,200,000
• Operating Expenses: $800,000
• Calculate the amount of inventory to be reported on the balance sheet.
• Determine the impact on net income due to the write-down of inventory.
• How would the financial statements be affected if the inventory was reported at cost?
• Discuss the rationale behind using the Conservatism Principle in this context.
• How should the company record the inventory write-down?