Principles of Accounting Volume 1
19th Edition
ISBN: 9781947172685
Author: OpenStax
Publisher: OpenStax College
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Discuss the potential impact of rising inventory levels on
the company's financial statements and the steps the
company can take to manage its inventory. What are the
risks associated with high levels of inventory?](https://content.bartleby.com/qna-images/question/b1bc3f7d-19b6-46a1-be75-d6ec24beca90/07e57f59-380f-4db8-912a-4b54152c406c/pafzbcb_thumbnail.jpeg)
Transcribed Image Text:Assignment
Discuss the potential impact of rising inventory levels on
the company's financial statements and the steps the
company can take to manage its inventory. What are the
risks associated with high levels of inventory?
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- Which of the following describes the economic order quantity (EOQ)? a. It is associated with a pull inventory system. b. It is the heart of a JIT purchasing system. c. It minimizes total ordering and carrying costs. d. It minimizes stock-out costs.arrow_forwardConsidering the following information, and applying the lower-of-cost-or-market approach, what is the correct value that should be reported on the balance sheet for the inventory?arrow_forwardInventory Write-Down The following information is taken from Aden Companys records: Required: 1. What is the correct inventory value if the company applies the LCNRV rule to each of the following? a. individual items b. groups of items c. the inventory as a whole 2. Next Level Are there any conditions under which a company may ignore the decline in the value of inventory below its cost?arrow_forward
- A JIT inventory management system maintains which of the following? a. Goods should be pushed through the system on a fixed schedule based on anticipated demand. b. Goods should be pulled through the system by present demand. c. Total inventory costs are minimized by balancing setup and carrying costs. d. Inventories are needed to avoid stock-out costs.arrow_forwardWhen would a company use the specific identification method of inventory cost allocation?arrow_forwardHow long does it take an inventory error affecting ending inventory to correct itself in the financial statements? Explain.arrow_forward
- Errors in Ending Inventory From time to time, business news will report that the management of a company has misstated its profits by knowingly establishing an incorrect amount for its ending inventory. Required: Explain how a misstatement of ending inventory can affect profit.arrow_forwardOne reason for inventory is to prevent shutdowns. How does the JIT approach to inventory management deal with this potential problem?arrow_forwardNeed all answerarrow_forward
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