Tyco acquired AMP. Tyco began to acquire AMP at the end of 1998, and the acquisition was completed in early 1999. AMP's profit before interest and taxes in the fourth quarter of 1998 was Us$85 million, but by the first quarter of 1999 (the quarter before the merger was completed), it suddenly dropped to US$12 million, and in the second quarter of 1999 (In the first quarter after the merger was completed), it quickly increased to US$24.5 million. The reason for the substantial increase in profits is the huge inventory impairment provision made in the first quarter of 1999.

Required:

How will the huge inventory impairment provision made in the first quarter increase the profit in the second quarter? Analyze from the accounting perspective.

Answer rating: 100% (QA)

Inventory impairment is the writing down off the inventory value The journal entry for inventory imp... View the full answer