The Following Event Occurred After the Company's Year-End but Before

question 54

Essay

The following event occurred after the company's year-end but before the completion of the audit. For this subsequent event, determine whether the event:
•requires an adjustment to the year-end financial statements,
•requires note disclosure, or
•requires neither adjustment to recognized amounts nor disclosure.
There is a significant fall in the market price of a major portion of inventory due to new technology making the existing items obsolete. The market price is lower than the current carrying value. (Justify your recommendation.)

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Definitions:

Oldest Retail Setting

Traditional or ancient marketplaces that historically served as the original venues for commerce and trade.

Main Street

A term often used metaphorically to refer to the typical norms and economic activities of small-town or everyday life in America.

Economic Center

A significant location or region within a country or the world known for its strong economic activity, influence, or wealth.

Off-Price Retailers

Retail stores that sell branded goods at lower prices than those typically charged by department stores or other conventional retailers, often merchandise that is in excess or from previous seasons.