Explain briefly the application of the LCM rule to ending inventory. Describe its effect on the balance sheet andincome statement when market is lower than cost

Q: Determine the effects of inventory errors on the financial statements.

A: If you understated ending inventory, your cost of goods sold will be overstated by the error amount,…

Q: Which of the following statements is correct? Group of answer choices A)The choice of an inventory…

A: SOLUTION AVERAGE COST METHOD IS USED TO CALCULATE THE COST OF INVENTORY AT THE END AND ALSO THE COST…

Q: Which of the following is not an inventory method/cost flow assumption? O a. First-in, first-out O…

A: 5 methods for inventory cost are below: The retail inventory method. The specific identification…

Q: "Market" is defined in the "Lower-of-cost-or-market" rule required to account for FIFO inventory as:…

A: Inventory- Inventory refers to the items which business kept on hand in order to make the money, it…

Q: Which cost formula for inventory best reflects the current value of inventory on the balance sheet?…

A: inventory valuation methods are based on the flow of inventory. There are mainly four methods of…

Q: Which of the following statement about the inventory write-down is not correct? * If the cost is…

A: As per International Accounting Standards IAS 2- “ Inventory includes assets that are held for the…

Q: When assessing inventory management policies, is the current ratio or acid-test ratio more…

A: Current Ratio = Current Ratio is Calculated by dividing the current Assets with current liabilties.…

Q: What is a LIFO inventory pool? How is the cost of ending inventory determined when pools are used?

A:

Q: Which of the following statements is NOT true of Economic Order Quantity? O A. The economic order…

A: EOQ: Economic Order Quantity is basically the optimal quantity of number of orders which in turn…

Q: Indicate the effects of inventory errors on the financial statements

A: Solution- 1-A merchandising company must be sure that it has properly valued its ending inventory.…

Q: Explain how the inventory cost flow assumption that was utilized might have an impact on liquidity…

A: Inventory Cost Flow Assumptions refer to the many ways for determining the cost of inventory sold…

Q: Which of the following statements regarding the lower of cost and net realizable value (LCNRV) rule…

A: The rule of valuing the inventory at cost or net realizable value is also called as Prudence concept…

Q: The weighted average inventory cost flow method is the least used of the inventory costing methods.…

A: When the inventory is valued at by calculating the weighted average rate per unit for the purchase…

Q: What is meant by the term gross margin? Describe costing inventory using first-in, first-out.…

A: What is meant by the term gross margin?

Q: Determine ending inventory using the dollar-value LIFO inventory method.

A: Dollar-value LIFO method: In this method, the valuation of inventory is calculated on the monetary…

Q: For valuation of inventory, the lower of cost or market rule may be applied to a. the total…

A: Inventory of the business should be valued by choosing appropriate method. Lower of cost of market…

Q: Briefly explain the usefulness of the inventory figure resulting from the application of lower of…

A: Net Realizable Value(NRV) refers to the inventory value which a business entity can realize from…

Q: Demonstrate how the inventory cost flow assumption utilized might have an impact on liquidity…

A: Inventory cost flow assumptions refers to the way in which costs are removed from inventory and…

Q: Which of the following inventory cost flow assumptions produces the same ending inventory values…

A: Periodic inventory system is a system where inventory records are updated on a periodic basis but in…

Q: Explain the (a) lower of cost or net realizable value (LCNRV) approach and the (b) lower of cost or…

A: LCNRV (Lower of Cost or Net Realizable Value) approach:   It is an approach that compares the cost…

Q: 1. Inventory should be stated at (a) Lower of cost and fair value. (b) Lower of cost and net…

A: Inventory means the stock of goods in which the businessmen deals. Inventory is to be valued as per…

Q: Which of the following inventory cost flow assumptions produces the same ending inventory values…

A: Periodic Inventory System : In periodic inventory system ending balance of inventory will be updated…

Q: The table below lists financial statement items that may be affected by the use of either the FIFO…

A: Rising costs is the situation when the prices keeps on increasing with time.

Q: The inventory evaluation method which does not represent the actual ending inventory value is?…

A: The question is multiple choice question. Required  Choose the Correct Option.

Q: Explain how liquidity measures can be influenced by the inventory cost flow assumption used.

A: Inventory Cost Flow Assumptions means the different techniques of measurement of cost of inventory…

Q: What are the reasons for making an estimate of the value of ending inventory?

A: Inventory- It is the amount of those units which is not sold yet by the entity or the units which…

Q: The process of recording inventory that gives a lower cost of a commodity sold in an income…

A: The inventory can be valued using various methods as LIFO, FIFO and average method.

Q: Comparing FIFO and LIFO, which one provides the more meaningful measure of ending inventory?

A: FIFO: Under this method, ending inventory is valued at the latest price and Merchandise sold are…

Q: Required: 1. Prepare the income statements to reflect the correct amounts, taking into consideration…

A: Overstatement of ending inventory will reduce the cost of goods sold and also increase the opening…

Q: Explain the lower of cost or market rule for inventory valuation and explain why it is GAAP.

A: Lower of cost or market value for inventory valuation is just a mixture of many accounting…

Q: Based on the following data, make a comparison between the use of the flow of inventory costs…

A: Given, sales = $200000 Selling per unit = $5 per unit Total number of units sold = Sales / selling…

Q: What is the purpose of disclosing the difference between the reported LIFO inventory amounts and…

A: Perpetual and periodic inventory system: In merchandise business, there are two types of inventory…

Q: Explain the gross profit method of estimating ending inventory.

A: Gross Profit: It refers to the difference between the sales and the cost of goods sold.

Q: The costs of ending inventory is similar under both periodic and perpetual inventory system if…

A: The given question is related to inventory valuation. The first method of inventory valuation is the…

Q: Question: Explain the First-In, First-Out (FIFO) method used for determining COGS and Ending…

A: The inventory can be valued using various methods as FIFO, LIFO, average method.

Q: Which of the following inventory method measures most closely the current cost of inventory?   a.…

A: The inventory valuation is carried out at the end of the accounting period. The different inventory…

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.