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Case Study Question: Case Study: XYZ Corporation's Inventory Valuation XYZ Corporation is a manufacturing company that produces electronic components. As part of your audit engagement,
Case Study Question: Case Study: XYZ Corporation's Inventory Valuation XYZ Corporation is a manufacturing company that produces electronic components. As part of your audit engagement, you are tasked with evaluating the inventory valuation practices of XYZ Corporation. The company uses the "lower of cost or market" method for valuing its inventory, and the audited financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP). Case Study Scenario: During your audit, you discover the following information regarding XYZ Corporation's inventory: 1. The company uses the weighted-average cost method for valuing its inventory. 2. As of the balance sheet date, the cost of inventory is $1,500,000. 3. The market value of the inventory has significantly decreased due to a sudden decline in demand for electronic components. The market value of the inventory is estimated to be $1,200,000. Questions: Based on the "lower of cost or market" method, how should XYZ Corporation value its inventory on the financial statements? Explain the accounting concept and the relevant principles involved. In light of the decrease in market value, discuss the implications for XYZ Corporation's financial statements and the potential impact on stakeholders, including investors and creditors. What ethical considerations should be taken into account when deciding how to report this inventory valuation
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