Question

Required information Exercise 14-35 Obsolete Inventory (LO 14-4, 14-5) (The following information applies to the questions displayed below) Armstrong Corporation manufactures bicycle parts. The company currently has a $18.400 Inventory of parts that have become obsolete due to changes in design specifications. The parts could be sold for $6,200, or modified for $9,000 and sold for $19,500. Exercise 14-35 Part 1 Required: 1. Identify the relevance of the data given in the exercise to the decision about what to do with the obsolete parts. Current sales value for unmodified parts Sales value for modified parts Modification costs Current book value of inventory

Answer 1

Required 1 Current sales Value for Unmodified Parts Sales value for Modified Parts Modification Costs Current Book Value of Inventory 6,200 19,500 9,000 18,400 $ Required 2 (a) Benefit if parts are sold without modification Net Benefit if parts are sold after modification $ $ 6.200 10,500 | 19500 -9000) | Required 2 (b) how should the modified parts bedispopsed Modify and sell. Since, parts have become obsolete, the costs incurred are Sunk Cost, which cannot be recoverd.