Diversied Inc. is a retailer that sells a variety of goods under three major business units. Its Food Products Division delivers wholesale food products to national grocery store chains. Its Home Appliances Division manufactures and sells home kitchen appliances such as refrigerators, microwave ovens, and dishwashers. Finally, its High Fashion Division is a recognized leader in high-end womens clothing. During his annual review of the companys nancial condition, Diversieds president noted that the companys inventory included a material reduction described as an allowance to reduce inventory to market. This entry was made to be in compliance with the lower of cost or market rules in valuing ending inventory. While the Home Appliances Division had received a considerable amount of negative publicity relating to res caused by defective switches in its products, the president felt that any reduction in the market value of these products at year end would be more than offset by the high margins in the High Fashion Division. Therefore, the president felt that no write-down should have been taken. Further, the president noted that the company had replaced the faulty switches in the third scal quarter and subsequent sales had shown that the market value of its appliances had partially recovered. All estimates are that the value of the appliance inventory should be completely recovered by the first quarter of the next scal year. The president wants to reverse the inventory reduction. The effect would be to increase the inventory value on the balance sheet and increase net income. You are the manager for the audit of Diversified Inc. and need to determine if the explanation of the president warrants adjusting the inventory value.

You need to prepare a research memo addressing the following questions: 1.Can the lower of cost or market test be applied be applied to each division individually or can it be applied to the inventory as a whole? The president is arguing that the profitability of the inventory in one division can be used to offset losses in another division.2. Is the assumption that inventory values will recover in a subsequent fiscal year sufficient justification to reverse the LCM adjustment?

Please use FASB code, for example ASC 845-10- 30-1"

In general, the accounting for nonmonetary transactions should be based on the fair values of the assets (or services) involved, which is the same basis as that used in monetary transactions. Thus, the cost of a nonmonetary asset acquired in exchange for another nonmonetary asset is the fair value of the asset surrendered to obtain it, and a gain or loss shall be recognized on the exchange. The fair value of the asset received shall be used to measure the cost if it is more clearly evident than the fair value of the asset surrendered. Similarly, a nonmonetary asset received in a nonreciprocal transfer shall be recorded at the fair value of the asset received. A transfer of a nonmonetary asset to a stockholder or to another entity in a nonreciprocal transfer shall be recorded at the fair value of the asset transferred and a gain or loss shall be recognized on the disposition of the asset. " copy and paste the information need to support the answer