Inventories

Lower Cost of Inventory Adjustment, Goodwill and Asset Disposal

University of Phoenix

Teresa Congleton

ACC 541

Leslie Crews, Facilitator

December 2, 2013

Accounting helps to analyze financial performance, decision-making, and obtaining funds and plays an important role for clients and employees of an organization. This paper attempts how under the guidelines of Financial Accounting Standards Board (FASB) affects each topic and assists in improving the financial statements of a clients company. Understanding the adjusting lower cost of market inventory on valuation, capitalizing interest on building construction, recording methods for gains and losses on asset disposal, and adjusting methods for goodwill impairment assists clients in making investment decisions and in analyzing their financial condition.

Adjusting Lower Cost of Market Inventory on Valuation

Inventory valuation helps an organization in providing a monetary value of items that make up their inventory. The values given to an inventory is a vital task because it represents a large portion of the current assets. The proper measurement and management is critical in establishing accurate financial statements (Needles & Powers, 2007). After analyzing the company’s financial health the results reflects the company should adopt the method of adjusting lower cost of market inventory on valuation. When inappropriate valuation of inventory, expenses, and incomes are not properly identified, ineffective decision-making could result. Companies are to identify the exact value of inventories as stated in the guidelines issued by the FASB and the American Institute of Certified Public Accountants. Valuing inventory is a pivotal aspect because it gives complete data of a company’s assets and affects the profits of that company. Values of inventories decrease from the real cost prices. At this point the accounting board suggests a company adopt a lower cost of market value (LCM). This method assists...