Intermediate Accounting, 10 Ed
10th Edition
ISBN: 9781260310177
Author: Mark W. Nelson, Wayne B. Thomas J. David Spiceland
Publisher: McGraw-Hill Education
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Question
Chapter 9, Problem 9.6DMP
(a)&(b)
To determine
Method of Inventory
Inventory refers to the current assets that a company expects to sell during the normal course of business operations, the goods that are under process to be completed for future sale, or currently used for producing goods to be sold in the market. Inventory is valued under three methods:
FIFO
Under this inventory method, the units that are purchased first, are sold first. Thus, it starts from the selling of the beginning inventory, followed by the units purchased in a chronological order of their purchases took place during a particular period.
LIFO
Under this inventory method, the units that are purchased last, are sold first. Thus, it starts from the selling of the units recently purchased and ending with the beginning inventory.
Average cost method
Under this method, the cost of the goods available for sale is divided by the number of units available for sale during a particular period.
To Explain: the accounting treatment for a change in the inventory method for (a) not involving LIFO and (b) from the LIFO method.
(c)
To determine
To Explain: the accounting treatment for a change in the inventory method to the LIFO method.
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Question 63
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I. The longer its customers normally hold inventory, the longer the credit period supplier firms normally offer. Still, suppliers have some flexibility in the credit terms they offer. If a supplier lengthens the credit period offered, this will shorten the customer's cash conversion cycle but lengthen the supplier firm's own CCC.
II. The cash conversion cycle (CCC) combines three factors: The inventory conversion period, the receivables collection period, and the payables deferral period, and its purpose is to show how long a firm must finance its working capital. Other things held constant, the shorter the CCC, the more effective the firm's working capital management.
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Problem 11-25 Multiple choice (IAA)
1. IFRS prohibits which cost flow assumption?
a. LIFO
b. Specific identification
6. Weighted average
i Any of these cost flow assumptions is allowed
с.
, What is the inventory pricing procedure in which the
oldest costs rarely have an effect on the ending
inventory?
a. FIFO
b. LIFO
c. Specific identification
d. Weighted average
3. In a period of falling prices which inventory method
generally provides the lowest amount of ending
inventory?
a. Weighted average
b. FIFO
c. Moving average
d. Specific identification
4. Which inventory cost flow assumption would consistently
result in the highest income in a period of rising prices
or inflation?
a. FIFO
b. LIFO
c. Weighted average
d. Specific identification
3. The costing of inventory must be deferred until the end
of reporting period under which of the following method of
inventory valuation?
a. Moving average
b. Weighted average
c. LIFÓ perpetual
d. FIFO perpetual
Question no 6
Errors occasionally occur when physically counting inventory items on hand. Identify the financial
statement effects of an overstatement of the ending inventory in the current period. If the error is not
corrected, how does it affect the financial statements for the following year? How is it possible for a
company to suffer a net loss for a given year, yet produce a positive net cash flow from operating
activities?
Chapter 9 Solutions
Intermediate Accounting, 10 Ed
Ch. 9 - Explain the (a) lower of cost or net realizable...Ch. 9 - What are the various levels of aggregation to...Ch. 9 - Describe the alternative approaches for recording...Ch. 9 - Explain the gross profit method of estimating...Ch. 9 - The Rider Company uses the gross profit method to...Ch. 9 - Explain the retail inventory method of estimating...Ch. 9 - Both the gross profit method and the retail...Ch. 9 - Define each of the following retail terms: initial...Ch. 9 - Explain how to estimate the average cost of...Ch. 9 - Prob. 9.10Q
Ch. 9 - Explain the LIFO retail inventory method.Ch. 9 - Discuss the treatment of freight-in, net markups,...Ch. 9 - Explain the difference between the retail...Ch. 9 - Prob. 9.14QCh. 9 - Prob. 9.15QCh. 9 - Explain the accounting treatment of material...Ch. 9 - Identify any differences between U.S. GAAP and...Ch. 9 - (Based on Appendix 9) Define purchase commitments....Ch. 9 - (Based on Appendix 9) Explain how purchase...Ch. 9 - Lower of cost or net realizable value LO91 Ross...Ch. 9 - Lower of cost or net realizable value LO91 SLR...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Prob. 9.5BECh. 9 - Gross profit method; solving for unknown LO92...Ch. 9 - Retail inventory method; average cost LO93 Kiddie...Ch. 9 - Retail inventory method; LIFO LO93 Refer to the...Ch. 9 - Conventional retail method LO94 Refer to the...Ch. 9 - Conventional retail method LO94 Roberson...Ch. 9 - Lower of cost or net realizable value LO91 Herman...Ch. 9 - Lower of cost or net realizable value LO91 The...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Lower of cost or market LO91 [This is a variation...Ch. 9 - Prob. 9.11ECh. 9 - Concepts; terminology LO91 through LO97 Listed...Ch. 9 - Prob. 9.1PCh. 9 - Prob. 9.3PCh. 9 - Prob. 9.8PCh. 9 - Prob. 9.1DMPCh. 9 - Prob. 9.3DMPCh. 9 - Prob. 9.4DMPCh. 9 - Prob. 9.5DMPCh. 9 - Prob. 9.6DMPCh. 9 - Prob. 9.7DMPCh. 9 - Real World Case 98 Various inventory issues;...Ch. 9 - Prob. 9.9DMPCh. 9 - Judgment Case 910 Inventory errors LO97 Some...Ch. 9 - Prob. 9.12DMPCh. 9 - Prob. 2CCTC
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