a. What is
the formal definition in the glossary of the term “Inventory?”

b. ABC
Company has a number of machines used for manufacturing its products. One of
ABC’s machine suppliers is trying to get rid of its existing machines to make
room for a new model, and is offering them at a sharply discounted price. As
such, ABC has decided to purchase a number of the sale-priced machines. ABC
intends to retire its existing machines early and to offer them for sale. Based
on the definition above, now that these machines are no longer used in
production and they are held for sale, should ABC reclassify them as inventory?

2. What is
the Codification topic number for inventory?

3. What
types of entities are not covered by the guidance in the Inventory Topic?
(Provide the Codification reference for your answer)

4. What is
the objective of accounting for inventories? (Provide the Codification
reference for your answer)

5. There are
a number of reasons why a company might determine that it will not recover in
sale the full cost that it has put into its inventory (physical deterioration,
obsolescence, changes in price levels, etc.). In this situation, guidance
states that the inventory must be written down to the lower of cost or market.
When such a write-down occurs, it is not expected that the inventory will
recover in value. However, on rare occasions inventory may recover its value
prior to being sold. What is the SEC’s position on accounting for this
restoration of inventory value? 

If it becomes apparent prior to sale that
inventory previously written-down will recover in value, should the inventory
continue to be carried at the reduced market value? 

Should it be restored to
the new market value (not to exceed original historical cost)? (Provide the
Codification reference for your answer)