Client_Understanding

Client Understanding Shareen Neale University of Phoenix Client Understanding Introduction Adjusting inventory value to the lower cost or market for financial reporting The organization should account for their adjusting inventory by reporting under the lower of cost or market rule by using the contra asset inventory account. Acccountingcoach(2009) states that this balance sheets account is used to report the amount that the inventory’s market amount is below the inventory’s cost amount (part 5). The lower cost or market price should be reported because the “recording of the cost implies a recovery of the cost” (Schroeder, Clark, & Cathey, 2005, p. 308). Capitalization of interest on building construction This section should be accounted for by either using the average rate of all outstanding debt or the interest charge on the specific debt instrument issued to finance the project. Recording gain or loss on a fixed asset disposal Adjustment of goodwill for impairment The readers of the organization’s financial statements must be able to understand that fair value represents the amount that a unit is worth under a current transaction. To do this the organization must account for their adjustment to goodwill for impairment by showing how they test for impairment. The organization must take two steps and as indicated by Appraisals Economic (2009), Conclusion References AccountingCoach. (2009). Accounting for lower of cost or market. Retrieved December 18, 2009 from http://www.accountingcoach.com/online-accounting-course/27Xpg05.html http://accountingtools.com/Pages_Articles/Articles_Taxation/Inventory-Valuation.html http://www.nysscpa.org/cpajournal/2004/1004/essentials/p.30.htm. Accountant. Retrieved on December 18, 2009 from Retrieved December 18, 2009 from http://www.obfs.uillinois.edu/Manual/Central_p/sec12-2.html.