What is the formula for calculating inventory adjustment?

To calculate inventory adjustment accurately, the correct formula includes sales price and residual book value (RBV) divided by the number of days in service. This approach provides a means of assessing how much value has been retained or lost from an inventory item, in this case, a vehicle, throughout its duration of service.

The rationale behind incorporating the sales price in the formula is that it reflects the current market condition, while the RBV indicates what has been accrued by the assets over time. Assessing the adjustment in terms of days in service helps to contextualize the value over the actual time the assets have been utilized, allowing for a better understanding of depreciation relative to usage.

This method ensures that the adjustment reflects a more dynamic picture of asset valuation rather than static cost calculations, which may not account for actual product performance in the operational timeline. Thus, the adjustment gives clearer insights for financial reporting and inventory management in an enterprise context.