Jones Co. is in a technology-intensive industry. Recently, one of its competitors introduced a new product with technology that might render obsolete some of Jones’s inventory. The accounting staff wants to follow the appropriate authoritative literature in determining the accounting for this significant market event.
Instructions
If your school has a subscription to the FASB Codification, go to aaahg.org/asclogin.cfm to log in and prepare responses to the following. Provide Codification references for your responses.
(a) Identify the primary authoritative guidance for the accounting for inventories. What is the predecessor literature?
(b) List three types of goods that are classified as inventory. What characteristic will automatically exclude an item from being classified as inventory?
(c) Define “market” as used in the phrase “lower-of-cost-or-market.”
(d) Explain when it is acceptable to state inventory above cost and which industries allow this practice.