If the amount of the Loss on Write-Down of Inventory is relatively small, it can be reported as part of the cost of goods sold. If the amount of the Loss on Write-Down of Inventory is significant, it should be reported as a separate line on the income statement.
Since the amount of the write-down of inventory reduces net income, it will also reduce the amount reported as owner's equity or stockholders' equity. Hence for the balance sheet and in the accounting equation, the asset inventory is reduced and the owner's or stockholders' equity is reduced.
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