Thread: Inventory items with no cost

You would put it on your books at the lower of cost or market, so yes there should be an entry.

Also, from a tax planning perspective, you want it on your books, because it will decrease your taxable income when its sold.

I agree. Just because it's not a cash contribution or he paid no cash for the inventory doesn't mean no entry.

I would record at market since there is no cost and credit owners equity.

However, what if an owner contributes inventory that had no cost to him or her. For example, assume the owner receives a product sample for free, but decides to add it to his company's inventory and sell it for $1.00?Do you believe the inventory item should be recorded at market value or is there no entry made in this case? My guess is the second. If that's the case, there would be no typical "debit COGS and credit Inventory" entry at the time of sale (which makes sense because there was no cost of goods sold).You would put it on your books at the lower of cost or market, so yes there should be an entry. Also, from a tax planning perspective, you want it on your books, because it will decrease your taxable income when its sold.

Any addition to the capital should be recorded at fair market value considering it is only a donation by the owner to the company.