Growth Corp., a publicly accountable entity, purchased a company with the following assets and liabilities for $100,000: Which of the following is not correct about the difference between carrying value and fair value?
A)Long-term liabilities could have a higher value due lower interest rates.
B)Inventories could have a lower fair value due to obsolescence.
C)Equipment could have a lower fair value due to decreased productive capacity.
D)Inventories could have a lower fair value due to accounting errors.

Question

Growth Corp., a publicly accountable entity, purchased a company with the following assets and liabilities for $100,000:  Which of the following is not correct about the difference between carrying value and fair value?
A)Long-term liabilities could have a higher value due lower interest rates. 
B)Inventories could have a lower fair value due to obsolescence. 
C)Equipment could have a lower fair value due to decreased productive capacity. 
D)Inventories could have a lower fair value due to accounting errors.

Quizplus · Accepted Answer

Inventories could have a lower fair value due to obsolescence, market conditions, or any other factors that affect their market value. However, accounting errors do not affect the market value of inventory and are not a valid reason for a decrease in fair value. Therefore, option D is not correct.