Company B has outdated inventory costing $300,000 in the warehouse that is held for over 2 years. It is expected that the inventory would be sold to the customers at only 50% of the cost next year. The client has a net income of $2,000,000. Management claimed that the inventory has not been sold and therefore it should be continued to record at cost. Q) For Company B, draft the opinion paragraph and any corresponding basis of opinion paragraph (if any). Effects on financial statements from any violation on the accounting standards should be calculated and stated in the basis of opinion paragraph if applicable. Assume tax rate of 10% when necessary.
Company B has outdated inventory costing $300,000 in the warehouse that is held for over 2 years. It is expected that the inventory would be sold to the customers at only 50% of the cost next year. The client has a net income of $2,000,000. Management claimed that the inventory has not been sold and therefore it should be continued to record at cost. Q) For Company B, draft the opinion paragraph and any corresponding basis of opinion paragraph (if any). Effects on financial statements from any violation on the accounting standards should be calculated and stated in the basis of opinion paragraph if applicable. Assume tax rate of 10% when necessary.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Company B has outdated inventory costing $300,000 in the warehouse that is held for over 2 years. It is expected that the inventory would be sold to the customers at only 50% of the cost next year. The client has a net income of $2,000,000. Management claimed that the inventory has not been sold and therefore it should be continued to record at cost.
Q) For Company B, draft the opinion paragraph and any corresponding basis of opinion paragraph (if any).
Effects on financial statements from any violation on the accounting standards should be calculated and stated in the basis of opinion paragraph if applicable. Assume tax rate of 10% when necessary.
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