Question

Its Slow Moving Inventory Topic: Asset Valuation/Write-Downs Jasmine is the first Controller ever hired at a medium-sized te
• Identify the potential accounting issue and how it should be handled.
•Identify the potential ethical problem, if one exists.
•Organize and develop your answers in a way to address or solve the problem(s). Use compelling information and/or facts to support tour argument/solution.
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Answer #1

The inventory should be valued at fair market value. The fair market value needs to be explained to the auditors. So the issue calls for writing down the slow moving inventory to their fair market value. There is no ethical problem as Jasmine or Terry have to prove to the auditors the fair market value of the concerned inventory. Terry should provide Jasmine evidence of fair market value that can be produced in front of the auditors. Fair market value is usually the market value at which the inventory sells. This will identify the value that needs to be written down. If the economy recovers in future, the inventory fair market value may be written back. Irrespective of whether the inventory is saleable now or later, the inventory needs to be valued at fair market value which will be the market value at which the inventory will sell now. Hence the need for a write-down.  

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