ASC SYSTEM: Accounting for Obsolete Inventory
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Hello, I need some help with the below. I don't feel I have enough experience to answer the below questions.
Nancy Co. is in a technology-intensive industry. Recently, one of its competitors introduced a new product with technology that might render obsolete some of Nancy's inventory. The accounting staff wants to follow the appropriate authoritative literature in determining the accounting for this significant market event.
1. Identify the primary authoritative guidance for accounting for inventories. (Provide the codification reference.)
2. What is the predecessor literature? (Hint: ARB)
3. List three types of goods that are classified as inventory. What characteristics will automatically exclude an item from being classified as inventory? Cut and paste from the ASC and provide citation, but be sure to also read what you are cutting and pasting.
4. Define "market" as used in the phrase "lower-of-cost-or-market." Cut and paste from the ASC and provide citation, but be sure to also read what you are cutting and pasting. (2 pts)
5. Explain when it is acceptable to state inventory above cost and which industries allow this practice. Cut and paste from the ASC and provide citation, but be sure to also read what you are cutting and pasting. (2 pts)
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Solution Summary
Citing references, this solution identifies the primary authoritative guidance for accounting for inventories, cites the predecessor literature, lists three types of goods that are classified as inventory, describes what characteristics will automatically exclude an item from being classified as inventory, defines "market" as used in the phrase "lower-of-cost-or-market", and explains when it is acceptable to state inventory above cost and which industries allow this practice.
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1. ASC 330, "Inventory", is the primary authoritative guidance for accounting for inventories.
2. ARB #43, "Inventory pricing", was its predecessor literature.
3. According to ASC 330-10-20, "inventory" is "the aggregate of those items of tangible personal property that have any of the following characteristics:
a. Held for sale in the ordinary course of business
b. In process of production for such sale
c. To be currently consumed in the production of goods or services to be available for sale.
The term inventory embraces goods awaiting sale (the ...
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