Apply a bead of glue along one side of center piece of wood (Image 1). Quickly spread glue with a fingertip then lay it flat and butt against right-side piece (Image 2). Apply glue to right side of left piece, spread with fingertip and butt against left side of center piece (Image 3). Make sure edges are lined up.
By deducting the value-of-inventory figure, you reduce your taxable income by as much as 88 percent (assuming a 12 percent average markup for inventory). You only pay taxes on your profits. Keeping track of your inventory costs reduces your tax bill by helping you arrive at a profit figure.
Now the good's NRV will be $100-$20-$60=$20. In this year's income statement, since the NRV ($20) is less than the cost of the good ($25), the NRV will get recorded as the Cost of Ending Inventory. To do so, an inventory write down of $25-$20=$5 is done, and hence a decrease of $5 in this year's income statement.RV is part of the Generally Accepted Accounting Principles and International Financial Reporting Standards (IFRS) that apply to valuing inventory, so as to not overstate or understate the value of inventory goods.