Rusty Dusty-Ethics Case-2

Rusty Dusty-Ethics Case-2 - Jamir Shefton Acct. 201 Pitsa...

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Jamir Shefton Acct. 201 Pitsa Johnson October 30, 2009 Rusty and Dusty Slow Movers While trying to straighten out her books, Penny notices the high inventory of old "high ticket" items. She is concerned about how accurately the inventory on the books reflects its fair market value. When the value of the inventory falls below its recorded cost, the amount recorded for inventory is written down to its lower market value. The lower of cost or market rule ensures inventory assets are not reported at more than they are worth. . Art wants Penny to disregard reevaluating the company’s inventory. If his request is met, this would violate the LCM rule. Art does not want to write-down an important part of this inventory; although that is the way it was done in the past. This would make the financial information inconsistent and irrelevant to its creditors and investors. Not documenting the correct value of inventory will cause the information on the Balance sheet to be incorrect and useless. Art then asks Penny to
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This note was uploaded on 03/11/2010 for the course ACCT 201 taught by Professor Shleifer during the Spring '08 term at Clemson.

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Rusty Dusty-Ethics Case-2 - Jamir Shefton Acct. 201 Pitsa...

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