Emily Holmes Owns and Operates a Large Antique Shop

question 123

Essay

Emily Holmes owns and operates a large antique shop.She uses the specific identification method to account for transactions that affect inventory.Holmes recently completed a physical inventory of the merchandise in her shop as part of her year-end work.Today,her accountant called to inform her that it would be necessary to adjust the inventory figure shown on the balance sheet,which will increase Holme's tax liability.Holmes argued that the inventory had to be correct,because she counted it twice and matched every item to an invoice.Cite reasons why the accountant would find it necessary to adjust the inventory even if Holme's count is accurate.

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Definitions:

Real Property

Land and anything permanently affixed to it, such as buildings and structures, legally recognized as immovable property.

Permanent Improvement

An addition or change to a piece of property that increases its value and is designed to last for a long period of time, such as building an extension.

Durable Power of Attorney

A legal document that grants one person the authority to act on behalf of another person in financial or health matters, remaining effective even if the grantor becomes incapacitated.

Incapacitated

Refers to a state in which an individual or entity is temporarily or permanently unable to perform their duties or activities due to physical or mental limitations.