how do we handle write downs under LIFO when market prices get too far ahead or away from the values on the bo

Question

how do we handle write downs under LIFO when market prices get too far ahead or away from the values on the books?

Answer 1

It doesn't matter what your cost formula is (things like FIFO and LIFO and Weighted average are called cost formulas), inventory must be stated at the lower of cost and net realisable value. If you need to write down some inventory, and if you're using the perpetual method, your entry:
Dr COGS
Cr Merchandise inventory

If you're using the periodic method, you don't pass any journal entry, you just use the written down figure for your ending inventory at year-end.

However you're supposed to choose a cost formula that best reflects the true circumstances. If you're consistently way off the mark, it may signal the wrong choice of cost formula and you may have to consider a change in accounting policy.