Client Understanding
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- Date Submitted: 12/08/2013 08:12 AM
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Client Understanding
ACC/541
December 2, 2013
Leslie Crews
Client Understanding Paper
My name is and I am the Staff I responsible for analyzing the work papers for your corporation. Leslie Crews has informed me that you are not clear about why I have asked for additional information. I need this information so I can be thorough; I want to make sure you are making the most of your available options and still using full disclosure. I will explain the necessity for documentation as it relates to adjusting lower cost of market value, capitalizing interest on building construction, recording gain or loss on asset disposal, and adjusting goodwill for impairment. I look forward to working with you; please contact me if you have any further questions or concerns.
Adjusting lower cost or market inventory on valuation
The lower cost or market (LCM) means comparing the market value of each item in inventory with its actual cost and using whichever is the lower of the two as its inventory value. The valuation of inventory is important because inventory is usually one of the biggest assets, and therefore has a huge impact on your company’s working capital and its position. Inventory valuation also has a major impact on the reported net profit (Schroeder, Clark, & Cathey, 2011).
Cost compared to Market Value
Cost is how much a company pays for an item in inventory, or how much it costs to manufacture it. Market value is the actual cost for replacing that inventory item. It is important to make sure that you do not go higher than the net realizable value (NRV), otherwise known as the ceiling, or the floor. To figure out the ceiling, you take the actual cost of the inventory item and subtract it from the expected sales price. The floor is found by subtracting the normal profit by the NRV. If the inventory has decreased in value it is important to make an adjustment on the balance sheet, to prevent from overstating your assets, and potentially...
ACC/541
December 2, 2013
Leslie Crews
Client Understanding Paper
My name is and I am the Staff I responsible for analyzing the work papers for your corporation. Leslie Crews has informed me that you are not clear about why I have asked for additional information. I need this information so I can be thorough; I want to make sure you are making the most of your available options and still using full disclosure. I will explain the necessity for documentation as it relates to adjusting lower cost of market value, capitalizing interest on building construction, recording gain or loss on asset disposal, and adjusting goodwill for impairment. I look forward to working with you; please contact me if you have any further questions or concerns.
Adjusting lower cost or market inventory on valuation
The lower cost or market (LCM) means comparing the market value of each item in inventory with its actual cost and using whichever is the lower of the two as its inventory value. The valuation of inventory is important because inventory is usually one of the biggest assets, and therefore has a huge impact on your company’s working capital and its position. Inventory valuation also has a major impact on the reported net profit (Schroeder, Clark, & Cathey, 2011).
Cost compared to Market Value
Cost is how much a company pays for an item in inventory, or how much it costs to manufacture it. Market value is the actual cost for replacing that inventory item. It is important to make sure that you do not go higher than the net realizable value (NRV), otherwise known as the ceiling, or the floor. To figure out the ceiling, you take the actual cost of the inventory item and subtract it from the expected sales price. The floor is found by subtracting the normal profit by the NRV. If the inventory has decreased in value it is important to make an adjustment on the balance sheet, to prevent from overstating your assets, and potentially...