You work as the assistant to the controller of a small, privately owned company. Part of your job is to create weekly reports of the company’s inventories. For the past several months, you have been excluding from your report a room full of damaged and/or obsolete inventory. Although these assets would usually have little or no market value, one of the owners recently found an interested buyer who wants to purchase the goods for scrap material at a deep discount. Even with this discount, the sales price of these items will be approximately $50,000.
The company has been experiencing severe financial difficulties. Today, in fact, the owners filed for bankruptcy. The controller has asked you to create one last inventory report, reminding you to ignore the damaged/ obsolete inventory like usual. When you ask him about the fact that there is now an interested buyer, he says that the owner found the buyer only by a stroke of luck, and that the goods really are worthless, so you should record them as such.
1. What should you do?
2. What issues are involved?