Amber Auto Parts adopted the dollar-value LIFO inventory method. The company has consistently used a retail price index when it should have used a producer’s index. As a result, its LIFO layers have been consistently undervalued. Why is the company’s error exacerbated by the fact that the company uses the LIFO method instead of the FIFO method?

Q: Analyze the truth of this statement. The income statements for merchandising and manufacturing…

A: Cost of goods manufactured - The cost of goods manufactured is calculated as follows - Total…

Q: A positive price-to-book ratio indicates something is wrong with a company's use of its assets. True…

A: In the world of finance and investing, numerous metrics and ratios are utilized to evaluate the…

Q: When following U.S. GAAP, the lower-of-cost-or-market rule for inventory requires a firm to report…

A: As per U.S. GAAP, the inventory should be reported in the balance sheet at their Cost or Market…

Q: The level of inventory a company maintains has important economic consequences, and it involves…

A: Ending inventory refers to the inventory which is left at the end of the accounting period. This…

Q: Which one of the following inventories may not be valued for balance sheet purposes at the…

A: Inventory is valued only at lower of Cost or Net realizable value(which is the selling price minus…

Q: Which of the following statements is not correct? Multiple Choice   Price discrimination is the…

A: The objective of the question is to identify the incorrect statement among the given options related…

Q: Why might a company estimate ending inventory instead of performing a physical count? O The…

A: Ending inventory counting and valuation helps a business to know value of inventory still available…

Q: Why does Target feel that the retail inventory method will result in inventory beingvalued at the…

A: LCM (Lower of Cost or Market) approach:   It is an approach that values the inventory at historical…

Q: Which one of the following is not a disadvantage of the specific identification method of inventory…

A: Under specific identification methods of inventory, specific inventory movement is measured. So it…

Q: During a period of rising inventory prices, a company's cost of goods sold would be higher using the…

A: LIFO means last in first out where as FIFO means first in first out.Inventory and cost of goods sold…

Q: It’s common in the electronics industry for unit costs of raw materials inventories to decline over…

A: Definition:   LIFO: Under this inventory method, the units that are purchased last are sold first.…

Q: The incomplete income statement of Bramble Corp. follows. Sales revenue Cost of goods sold Gross…

A: Income Statement:Which is a part of financial statement shows the income and expenses for the…

Q: The major criticism of the lower of cost or market rule for valuation of inventory is that

A:

Q: If costs are rising, which inventory costing method will result in the lowest income tax expense for…

A: Inventory is very necessary in the business but method of valuation decide the cost of goods sold…

Q: Very high inventory turnover ratio relative to industry norms could possibly indicate the company…

A: The objective of the question is to understand the implications of a very high inventory turnover…

Q: Explain the purpose of the inventory turnover ratio? Is it possible for a firm to have a high…

A: In finance we make use of various financial ratios to determine the financial health of a company.…

Q: ts) An auditor recently asked an accounting manager to perform a LCM test on a batch of inventory.…

A: Valuation of Inventory: The lower of cost or market (LCM) approach stipulates that when valuing a…

Q: Analysts must recognize that the use of the specific identification method to value inventory has a…

A: The amount, by which the Inventory Level exceeds the Closing Inventory level is referred to as the…

Q: Ward Hardware does not expect costs to change dramatically and wants to use an inventory costing…

A: Perpetual Inventory System is an accounting system of valuing the inventory where there is a need…

Q: 3. What is the purpose of the current ratio? Assume that Island Solutions want to compute its…

A: The current ratio is a financial metric that measures a company's ability to cover its short-term…

Q: B-Marts' large proportion of merchandise held on consignment from suppliers. Which account balance…

A: Audit is the process of checking and verifying books of account of the business in order to ensure…

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.