ABC company supplies parts to a major manufacturer for the production of Item I. The carrying amount of the inventory of parts at the end of the fiscal year 2020 is €2,000,000, which was considerably higher compared to the level of inventory of Item I in previous periods. During January 2021 the manufacturer terminated the production of Item I and started the production of Item II. The parts produced by ABC are not interchangeable between Item I and Item II. Moreover, Item I cannot be sold to another manufacturer. - Discuss whether ABC should write-down its inventory for the financial statements of 2020.
ABC company supplies parts to a major manufacturer for the production of Item I. The carrying amount of the inventory of parts at the end of the fiscal year 2020 is €2,000,000, which was considerably higher compared to the level of inventory of Item I in previous periods. During January 2021 the manufacturer terminated the production of Item I and started the production of Item II. The parts produced by ABC are not interchangeable between Item I and Item II. Moreover, Item I cannot be sold to another manufacturer. - Discuss whether ABC should write-down its inventory for the financial statements of 2020.
Practical Management Science
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ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
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ABC company supplies parts to a major manufacturer for the production of Item I. The
carrying amount of the inventory of parts at the end of the fiscal year 2020 is €2,000,000,
which was considerably higher compared to the level of inventory of Item I in previous
periods. During January 2021 the manufacturer terminated the production of Item I and
started the production of Item II. The parts produced by ABC are not interchangeable
between Item I and Item II. Moreover, Item I cannot be sold to another manufacturer.
- Discuss whether ABC should write-down its inventory for the financial statements
of 2020.
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