Fundamentals Of Financial Accounting
6th Edition
ISBN: 9781259864230
Author: PHILLIPS, Fred, Libby, Robert, Patricia A.
Publisher: Mcgraw-hill Education,
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Chapter 7, Problem 12COP
To determine
Analyze the financial information to identify three observations that lead to inventory write-down to LCM/NRV.
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Students have asked these similar questions
Which of the following statements about FIFO is true?
Select one:
a. All of the statements are correct
b. Cost of goods sold is calculated using the costs of the earliest purchased inventory.
c. The value of merchandise inventory is made up of the costs of the most recently purchased inventory.
d. Under FIFO, a schedule is used to track the different costs of purchased inventory.
Required: 1. Calculate ending inventory using the lower of cost and net realizable
value. 2. Record any necessary adjustment to inventory. 3. Determine the impact
of the adjustment in the financial statements.( Balance Sheet&Income statement)
erms and phrases relating to concepts discussed in this chapter along with descriptions of those terms and phrases follow. Match each term, 1 through 15, with the best description a through o.
Key Inventory Terms and Phrases
Key Inventory Terms and Phrases
Description of Terms and Phrases
Answerabcdefghijklmno
1. Net realizable value
a. Requires retroactive restatement of financial statements
Answerabcdefghijklmno
2. Lower-of-cost-or-market
b. Method for valuing inventory applying to LIFO and retail methods
Answerabcdefghijklmno
3. Allowance to reduce inventory to net realizable value
c. Cancellation of additional markup
Answerabcdefghijklmno
4. Gross profit method
d. Inventory estimation that is not acceptable under GAAP
Answerabcdefghijklmno
5. Estimated loss on purchase commitment
e. Method that approximates lower-of-cost-or-market
Answerabcdefghijklmno
6. Change in inventory method from average to FIFO
f. Not usually practical to retroactively restate or adjust…
Chapter 7 Solutions
Fundamentals Of Financial Accounting
Ch. 7 - What are three goals of inventory management?Ch. 7 - Describe the specific types of inventory reported...Ch. 7 - The chapter discussed four inventory costing...Ch. 7 - Which inventory cost flow method is most similar...Ch. 7 - Where possible, the inventory costing method...Ch. 7 - Contrast the effects of LIFO versus FIFO on ending...Ch. 7 - Contrast the income statement effect of LIFO...Ch. 7 - Several managers in your company are experiencing...Ch. 7 - Explain briefly the application of the LCM rule to...Ch. 7 - Prob. 10Q
Ch. 7 - You work for a made-to-order clothing company,...Ch. 7 - Prob. 12QCh. 7 - (Supplement 7B) Explain why an error in ending...Ch. 7 - Which of the following statements are true...Ch. 7 - The inventory costing method selected by a company...Ch. 7 - Which of the following is not a name for a...Ch. 7 - Which of the following correctly expresses the...Ch. 7 - A New York bridal dress designer that makes...Ch. 7 - If costs are rising, which of the following will...Ch. 7 - Which inventory method provides a better matching...Ch. 7 - Which of the following regarding the lower of cost...Ch. 7 - An increasing inventory turnover ratio a....Ch. 7 - In which of the following situations is an LCM/NRV...Ch. 7 - Matching Inventory Items to Type of Business Match...Ch. 7 - Reporting Goods in Transit Abercrombie Fitch Co....Ch. 7 - Prob. 3MECh. 7 - Reporting Inventory-Related Accounts in the...Ch. 7 - Matching Financial Statement Effects to Inventory...Ch. 7 - Matching Inventory Costing Method Choices to...Ch. 7 - Calculating Cost of Goods Available for Sale,...Ch. 7 - Calculating Cost of Goods Available for Sale,...Ch. 7 - Calculating Cost of Goods Available for Sale,...Ch. 7 - Prob. 10MECh. 7 - Calculating Cost of Goods Available for Sale, Cost...Ch. 7 - Calculating Cost of Goods Available for Sale, Cost...Ch. 7 - Calculating Cost of Goods Available for Sale, Cost...Ch. 7 - Reporting Inventory under Lower of Cost or...Ch. 7 - Preparing the Journal Entry to Record Lower of...Ch. 7 - Determining the Effects of Inventory Management...Ch. 7 - Interpreting LCM Financial Statement Note...Ch. 7 - Calculating the Inventory Turnover Ratio and Days...Ch. 7 - Prob. 19MECh. 7 - Prob. 20MECh. 7 - Prob. 21MECh. 7 - (Supplement 7A) Calculating Cost of Goods Sold and...Ch. 7 - (Supplement 7B) Determining the Financial...Ch. 7 - Prob. 24MECh. 7 - Reporting Goods in Transit and Consignment...Ch. 7 - Determining the Correct Inventory Balance Seemore...Ch. 7 - Determining the Correct Inventory Balance Seemore...Ch. 7 - Calculating Cost of Ending Inventory and Cost of...Ch. 7 - Calculating Cost of Ending Inventory and Cost of...Ch. 7 - Prob. 6ECh. 7 - Analyzing and Interpreting the Financial Statement...Ch. 7 - Evaluating the Effects of Inventory Methods on...Ch. 7 - Choosing LIFO versus FIFO When Costs Are Rising...Ch. 7 - Using FIFO for Multiproduct Inventory Transactions...Ch. 7 - Reporting Inventory at Lower of Cost or Market/Net...Ch. 7 - Reporting Inventory at Lower of Cost or Market/Net...Ch. 7 - Analyzing and Interpreting the Inventory Turnover...Ch. 7 - Analyzing and Interpreting the Effects of the...Ch. 7 - Prob. 15ECh. 7 - Analyzing and Interpreting the Financial Statement...Ch. 7 - Prob. 17ECh. 7 - Analyzing the Effects of Four Alternative...Ch. 7 - Evaluating the Income Statement and Income Tax...Ch. 7 - Calculating and Interpreting the Inventory...Ch. 7 - Prob. 4CPCh. 7 - (Supplement 7B) Analyzing and Interpreting the...Ch. 7 - Analyzing the Effects of Four Alternative...Ch. 7 - Evaluating the Income Statement and Income Tax...Ch. 7 - Prob. 3PACh. 7 - Prob. 4PACh. 7 - (Supplement 7B) Analyzing and Interpreting the...Ch. 7 - Prob. 1PBCh. 7 - Prob. 2PBCh. 7 - Prob. 3PBCh. 7 - Prob. 4PBCh. 7 - (Supplement 7B) Analyzing and Interpreting the...Ch. 7 - Prob. 1COPCh. 7 - (Supplement 7A) Recording Inventory Transactions,...Ch. 7 - (Supplement 7A) Recording Inventory Purchases,...Ch. 7 - (Supplement 7A) Recording Inventory Purchases,...Ch. 7 - Prob. 5COPCh. 7 - Prob. 6COPCh. 7 - Prob. 7COPCh. 7 - Prob. 8COPCh. 7 - Prob. 9COPCh. 7 - Prob. 10COPCh. 7 - Prob. 11COPCh. 7 - Prob. 12COPCh. 7 - Prob. 1SDCCh. 7 - Prob. 2SDCCh. 7 - Critical Thinking: Income Manipulation under the...Ch. 7 - Accounting for Changing Inventory Costs In...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Which of the following, if compared to the other methods for valuing inventory, has a material difference? A. LIFO B: FIFO C: Weighted Average D: Specific Identification.arrow_forwardApplying Lower of Cost or Market value (LCM) to following items to determine fare inventory value. Make necessary Journal entry in case there is difference in inventory value compare to its original cost. (picture)arrow_forwardWhich of the following is accounted for prospectively? Change in reporting entity. Change in the percentage used to determine warranty expense. Correction of an error. Changes from the weighted-average method of inventory costing to FIFO.arrow_forward
- Based on the following data, make a comparison between the use of the flow of inventory costs assumptions with the FIFO and LIFO methods and provide an overview of why in the end LIFO should not be used. (on the image below)arrow_forwardRequired: Compute for the correct amount of inventory to be presented in CCC’s statement of financial position.arrow_forwardApplying the lower-of-cost-or-market approach, what is the correct value that should be reported on the balance sheet for the inventory?arrow_forward
- Which inventory cost flow assumption does IFRS not allow? a. Specific identification. b. FIFO. c. LIFO. d. Average cost.arrow_forwardExplain briefly the application of the LCM rule to ending inventory. Describe its effect on the balance sheet andincome statement when market is lower than costarrow_forwardWhich inventory costing method produces a more accurate balance sheet – FIFO or LIFO? ______________ Provide brief explanation.arrow_forward
- Based on the data in Exercise 6-15 part (a) and assuming that cost was determined by the FIFO method, show how the inventory would appear on the balance sheet.arrow_forwardThe goal of this is to review concepts in inventory cost methods. Directions 1.What are the three primary inventory cost flow assumptions? 2. How is cost of goods sold calculated in each of the inventory cost flow assumptions? 3. How does the specific identification method differ from these three primary inventory cost flow assumptions? explain in good detail responses for each one of the questionsarrow_forwardShort answer: Define a 'responsibility' in accordance with the Conceptual Framework's explanation, using examples. Explain briefly the accounting term "reporting entity" in accordance with the Conceptual Framework for Financial Reporting. Regarding the recording and subsequent revaluation of inventory, please define "the lower of cost and net realizable value." Briefly explain the “accrual basis assumption" and why financial statements are prepared under this basis.arrow_forward
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