Submitted by: Submitted by jugdeep
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Category: Other Topics
Date Submitted: 05/10/2010 07:31 AM
In this report your company will find how adjusting to lower of cost or market inventory on valuation, capitalizing interest on building construction, recording gains or loss on asset disposal, and adjusting goodwill for impairment as per your recent request. In order to completely grasp the situation, we will define the terms and how to detail with them on a case by case issue.
Adjusting lower cost or market inventory on valuation:
Many companies try using the First in First out (FIFO) or Last in First out (LIFO) methods when it comes to valuing their inventory. However, sometimes the market conditions or goods change in the market lead the business owner with cost of goods that are much higher and what the goods are truly worth to customers. For example, let us assume a t-shirt was purchased for $10 about three years back. Now the same T-shirt is being sold in the market for $8, regardless of the purchase price. Or the t-shirt that was originally purchased sat in the window display and became discolored and now it is worth $8. As a business, it will be necessary to reevaluate the inventory to the current market value for financial statement purposes, thus the concept of adjusting lower cost or market inventory. Therefore, we would need to take the new valuation of the inventory and write-down in accordance with current fair market value prices. As far as the financial statement is concerned, it will be required to clarify this for the reader through a proper footnote in the statement letting the read know change in the valuation of inventory pricing. If the loss is substantial, then a footnote should include the classification of the loss. In addition, there will be an “entry is similar to other adjusting entries in that it involves a balance sheet account (Allowance to Reduce Inventory to LCM) and an income statement account (Loss from Reducing Inventory to LCM).” (Accounting Coach)
Capitalizing interest on building construction
When a company finances the...