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Name: Company B has outdated inventory costing $300,000 in the warehouse tha
Uploaded: 2024-03-20T06:32:37.000Z
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Description: Company B has outdated inventory costing $300,000 in the warehouse that is held for over 2 years. It is expected that the inventory would be sold to the customers at only 50% of the cost next year. The client has a net income of $2,000,000. Managemen

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter5: Inventories And Cost Of Goods Sold

Section: Chapter Questions

Problem 5.10DC

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Company B has outdated inventory costing $300,000 in the warehouse that is held for over 2 years. It is expected that the inventory would be sold to the customers at only 50% of the cost next year. The client has a net income of $2,000,000. Management claimed that the inventory has not been sold and therefore it should be continued to record at cost. Q) For Company B, draft the opinion paragraph and any corresponding basis of opinion paragraph (if any). Effects on financial statements from any violation on the accounting standards should be calculated and stated in the basis of opinion paragraph if applicable. Assume tax rate of 10% when necessary.

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