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:

Salts

Ionic compounds resulting from the neutralization reaction of an acid and a base, consisting of cations (other than H+) and anions (other than OH-).

Water

A transparent, tasteless, odorless, and nearly colorless chemical substance which is the main constituent of Earth's hydrosphere, and the fluids of all known living organisms.

Mass Number

Of an isotope, the total number of protons and neutrons in the atomic nucleus.

Neutrons

Particles in an atom with no electrical charge, found in the nucleus alongside protons.