Question: Can I get it step by step please on how to solve this Case 1: Delayed write-downs of current or long-term assets Singapore-based Creative Technology
Case 1: Delayed write-downs of current or long-term assets Singapore-based Creative Technology posted impressive revenue growth from the second half of 2003 through the first quarter of 2005, with predictable spikes in holiday season sales in both 2003 and 2004. However, gross margins steadily declined from 35 percent to 23 percent over this period. A more worrying trend was the firm's inventory management. Growth in inventory far outpaced growth in sales, leading to a 58 percent increase in days' inventory, from 100 days for the quarter ending September 30, 2003, to 158 days for the quarter ending March 31, 2005. Inventory at the end of March 2005 was valued at $451.2 million. Case 1: Delayed write-downs of current or long-term assets How much excess inventory do you estimate Creative Technology is holding in March 2005 if the firm's optimal days' inventory is 100 days? Calculate the inventory impairment charge for Creative Technology if 50 percent of this excess inventory is deemed worthless? Record the changes to Creative Technology's financial statements from adjusting for this impairment (assuming the local statutory tax rate of 20 percent) Case 1: Delayed write-downs of current or long-term assets Singapore-based Creative Technology posted impressive revenue growth from the second half of 2003 through the first quarter of 2005, with predictable spikes in holiday season sales in both 2003 and 2004. However, gross margins steadily declined from 35 percent to 23 percent over this period. A more worrying trend was the firm's inventory management. Growth in inventory far outpaced growth in sales, leading to a 58 percent increase in days' inventory, from 100 days for the quarter ending September 30, 2003, to 158 days for the quarter ending March 31, 2005. Inventory at the end of March 2005 was valued at $451.2 million. Case 1: Delayed write-downs of current or long-term assets How much excess inventory do you estimate Creative Technology is holding in March 2005 if the firm's optimal days' inventory is 100 days? Calculate the inventory impairment charge for Creative Technology if 50 percent of this excess inventory is deemed worthless? Record the changes to Creative Technology's financial statements from adjusting for this impairment (assuming the local statutory tax rate of 20 percent)
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