Disposed of Book Inventory and not sure how to handle

[53papabear]

I'm an Author and started 2023 with a $633 Inventory of Books. In May I revised the content of these books and ordered ~$500 of the new books, which I believe I'm supposed to enter under Cost of Purchase. This would technically increase my inventory to $1,133. Since the old $633 of books was no good anymore, I destroyed them, leaving me with an inventory of ~$500. If I enter Inventory Beginning 2023 as $633 and enter ~$500 under Cost of Purchase (which would be the purchase of the new books), then Inventory End of 2023 as $500, I don't know where to enter the lost/destruction of the $633 inventory of books? I don't see anywhere under Business Expenses to enter the disposal of the old books?

[MinhT1]

The loss from the destruction of the old books is already included in Cost of sales.

You'll have Opening Inventory $633 + Purchases $500 - Closing Inventory $500 = $633. This is your Cost of sales.

[Carl]

Keep in mind that your Beginning of Year Inventory Balance absolutely must match your prior year's End of Year Inventory Balance. If it does not, then you'll have some 'splainin' to do to the IRS, and there is no reason or excuse you can give that they will find acceptable.

If you show that inventory as removed for personal use, then what you paid for that inventory is not tax deductible. One thing you might be able to do, is to show that inventory as "sold" for $0. That's the only way I can think of off the top of my head, that will allow you to deduct what you paid for that inventory, from your taxable business income. If it won't accept $0, then make it $1, open your wallet and buy the books from your business for that $1.

[Anonymous_]

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@Carl wrote:

One thing you might be able to do, is to show that inventory as "sold" for $0. That's the only way I can think of off the top of my head, that will allow you to deduct what you paid for that inventory, from your taxable business income. 

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It's simply the Beginning of the year inventory plus Purchases less the Ending Inventory that equals cost of goods sold (COGS).

There is no need to "deduct what you paid" as the deduction is included in the lower ending inventory value.

$633 - Beginning of the year; PLUS

$500 - Purchases = $1133

$1133 Less

$500 Ending Inventory =

$633 COGS (which is directly deducted from Gross Sales).

[Carl]

It's simply the Beginning of the year inventory plus Purchases less the Ending Inventory that equals cost of goods sold (COGS).

DOH! (Homer Simpson moment here)  Yes. Simply add the cost of the disposed of inventory to the "Cost of Goods Sold" during the tax year. Done. Done..... and Done.

[Anonymous_]

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@Carl wrote:

DOH! (Homer Simpson moment here)  Yes. Simply add the cost of the disposed of inventory to the "Cost of Goods Sold" during the tax year. Done. Done..... and Done.

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No, there is no need to add the cost of anything to anything else. The COGS formula takes care of the disposed of inventory as a result of the reduction in ending inventory (i.e., ending inventory is reduced by $633, the cost of the inventory that was discarded).

[Carl]

the cost of the inventory that was discarded).

That works too. Didn't think of that.