You never should have bought what you thought was only 1-day-old shrimp to then sell on the side of the road to hungry beach-goers over the weekend. Normally, you sold chili, which "kept" a long time. But uh, not so much for that shrimp.
It was the smell that first gave away its harvest date, which was probably a week ago. So that $18,000 worth of Franzi Shrimp? Yeah. A total inventory write-off.
From an accounting perspective, it's as if you had a load of expenses ($18,000), which then produced zero revenues. You held it as being worth 18 grand on your balance sheet, and the moment you knew it wasn't, uh, sellable...well, you just wrote it off as being worth zero, hoping that there wouldn't be incremental expenses to dispose of it. Luckily, Todd's Cat Show happened to be driving by and, well, at least Franzi made somebody happy.
Related or Semi-related Video
Finance: What is inventory?2 Views
Finance allah shmoop What is inventory Well it's Just stuff
you have for sale in one form or another An
auto dealer Well all those cars she has sitting out
there in the sun is a dive bombing targets for
the birds Yeah while their inventory to the car dealership
the cars are inventory the loads of nose hair trimmers
sitting on the shelves at the well appointed nostril fine
store best nostril trimming store in the world Yet their
inventory albeit kind of gross ish inventory especially after use
the four thousand yards of denim cloth sitting in the
weaving factory waiting for thirteen year old girls in thailand
toe weave it all together to make levi's for the
gap Yep that cloth is inventory It isn't finished inventory
It's just a work in process not yet ready for
prime time or a prime thigh or whatever But it's
an asset for the company who owns it and it
is held as inventory on the balance sheet Work in
process right there at the balance sheet right there Okay
And when that inventory is sold and turned into revenues
it'll just become part of the expenses line on the
income statement usually has cost of goods sold or caw
Gse that's What people in the accounting bids say Cocks
thie Inventory is a good but inventory is always good
Of course as many a customer has learned after taking
a hefty shock straight to the hunger And that hurts
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Work-in-process inventory is just inventory... that is in the process of being built. In other words, it accounts for the inventory's asset value.