Repossessed merchandise as a result of a defaulted installment sales contract should be recorded at the best possible estimate of what the item can ultimately be resold for in the second-hand market.

Question

Quizplus · Accepted Answer

Repossessed merchandise should be recorded at the lower of its cost or market value, not just the estimated resale value in the second-hand market. This approach ensures that the asset is not overstated on the balance sheet.

Repossessed Merchandise as a Result of a Defaulted Installment Sales