Shahi Foods & Spices Company purchased goods for OMR 25,000 and sold 70% of such goods during the accounting year ended on 31-12-2019. The market value of remaining goods was OMR 5,000. The company valued the closing inventory at OMR 5,000 and not at OMR 7,500. Is there any violation of accounting concept/convention by Shahi Foods & Spices Company?

Shahi Foods & Spices Company purchased goods for OMR 25,000 and sold 70% of such goods during the accounting year ended on 31-12-2019. The market value of remaining goods was OMR 5,000. The company valued the closing inventory at OMR 5,000 and not at OMR 7,500. Is there any violation of accounting concept/convention by Shahi Foods & Spices Company?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter22: Accounting For Changes And Errors.

Section: Chapter Questions

Problem 4P: Schmidt Company began operations on January 1, 2018, and used the LIFO inventory method for both...

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Schmidt Company began operations on January 1, 2018, and used the LIFO inventory method for both financial reporting and income taxes. However, at the beginning of 2020, Schmidt decided to switch to the average cost inventory method for financial and income tax reporting. It had previously reported the following financial statement information for 2019: An analysis of the accounting records discloses the following cost of goods sold under the LIFO and average cost inventory methods: There are no indirect effects of the change in inventory method. Revenues for 2020 total 130,000; operating expenses for 2020 total 30,000. Schmidt is subject to a 21% income tax rate in all years; it pays all income taxes payable in the next quarter. Assume that any deferred tax liability was paid in the subsequent year. Schmidt had 10,000 shares of common stock outstanding during all years; it paid dividends of 1 per share in 2020. At the end of 2020, Schmidt had cash of 15,600, inventory of 34,000, other assets of 76,000, income taxes payable of 4,200, and accounts payable of 3,000. It desires to show financial statements for the current year and previous year in its 2020 annual report. Required: 1. Prepare the journal entry to reflect the change in method at the beginning of 2020. Show supporting calculations. 2. Prepare the 2020 financial statements. Notes to the financial statements are not necessary. Show supporting calculations.
Shahi Foods & Spices Company purchased goods for OMR 25,000 and sold 70% of such goods during the accounting year ended on 31-12-2019. The market value of remaining goods was OMR 5,000. The company valued the closing inventory at OMR 5,000 and not at OMR 7,500. what is the violation of accounting concept/convention by Shahi Foods & Spices Company? Justify your answer.
3) a) Shahi Foods & Spices Company purchased goods for OMR 25,000 and sold 70% of such goods during the accounting year ended on 31-12-2019. The market value of remaining goods was OMR 5,000. The company valued the closing inventory at OMR 5,000 and not at OMR 7,500. Is there any violation of accounting concept/convention by Shahi Foods & Spices Company? Justify your answer. b) Sky Jewelers Muscat received an order to supply gold ornaments worth OMR 50,000. They supplied ornaments worth OMR 30,000 up to the year ending 31st December 2020 and rest of the ornaments worth OMR 20,000 were supplied in January 2021. Which accounting concept/convention must be followed by Sky Jewelers while recording this transaction? Discuss.
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