Assume the perpetual inventory system is used unless stated otherwise. Determining inventory accounting principles Ward Hardware used the FIFO inventory costing method in 2018. Ward plans to continue using the FIFO method in future years. Which accounting principle is most relevant to Ward’s decision?

Assume the perpetual inventory system is used unless stated otherwise. Determining inventory accounting principles Ward Hardware used the FIFO inventory costing method in 2018. Ward plans to continue using the FIFO method in future years. Which accounting principle is most relevant to Ward’s decision?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter10: Inventory

Section: Chapter Questions

Problem 12MC: Which of the following financial statements would be impacted by a current-year ending inventory...

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Which of the following financial statements would be impacted by a current-year ending inventory error, when using a periodic inventory updating system? A. balance sheet B. income statement C. neither statement D. both statements
Grimstad Company uses FIFO for internal reporting purposes and LIFO for financial reporting and income tax purposes. At the end of 2019, the following information was obtained from the inventory records: Required: 1. Prepare the necessary adjusting journal entry assuming that Grimstad converts the accounts to LIFO at the end of 2019. 2. Indicate how Grimstad would disclose the inventory value on its comparative balance sheets prepared at the end of 2019. 3. Next Level By how much would Grimstads cost of goods sold differ in 2019 if it used FIFO for external reporting?
Which of the following describes features of a perpetual inventory system? A. Technology is normally used to record inventory changes. B. Merchandise bought is recorded as purchases. C. An adjusting journal entry is required at year end, to match physical counts to the asset account. D. Inventory is updated at the end of the period.
Effects of Inventory Costing Methods Jefferson Enterprises has the following income statement data available for 2019: Jefferson uses a perpetual inventory accounting system and the average cost method. Jefferson is considering adopting the FIFO or LIFO method for costing inventory. Jeffersons accountant prepared the following data: Required: 1. Compute income before taxes, income taxes expense, and net income for each of the three inventory costing methods. (Round to the nearest dollar.) 2. CONCEPTUAL CONNECTION Why are the cost of goods sold and ending inventory amounts different for each of the three methods? What do these amounts tell us about the purchase price of inventory during the year? 3. CONCEPTUAL CONNECTION Which method produces the most realistic amount for net income? For inventory? Explain your answer.
Koopman Company began operations on January 1, 2018, and uses they FIFO inventory method for financial reporting and the average cost inventory method for income taxes. At the beginning of 2020, Koopman decided to switch to the average cost inventory method for financial 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 FIFO 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. Koopman is subject to a 21% income tax rate in all years; it pays the income taxes payable of a current year in the first quarter of the next year. Koopman 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, Koopman had cash of 10,000, inventory of 24,000, other assets of 70,800, accounts payable of 4,500, and income taxes payable of 6,000. 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 methods 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.
Perpetual and Periodic Inventory Systems Below is a list of inventory systems options. a. Perpetual inventory system b. Periodic inventory system c. Both perpetual and periodic inventory systems Required: Match each option with one of the following: 1. Only revenue is recorded as sales are made during the period; the cost of goods sold is recorded at the end of the period. 2. Cost of goods sold is determined as each sale is made. 3. Inventory purchases are recorded in an inventory account. 4. Inventory purchases are recorded in a purchases account. 5. Cost of goods sold is determined only at the end of the period by subtracting the cost of ending inventory from the cost of goods available for sale. 6. Both revenue and cost of goods sold are recorded during the period as sales are made. 7. The inventory is verified by a physical count.
Ward Hardware used the FIFO inventory costing method in 2024. Ward plans to continue using the FIFO method in future years. Which accounting principle is most relevant to Ward's decision? O A. Disclosure Principle O B. Materiality Concept OC. Conservatism O D. Consistency Principle
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FRUITS Company wants to estimate its ending inventory balance by applying the retail inventory method. For the year ended and as of December 31, 2022, the following amounts were reported: Determine the amount of COGS under retail inventory method – FIFO method: Determine the amount of COGS under retail inventory method – average method: Determine the amount of ending inventory under retail inventory method – LCNRV method: Determine the amount of ending inventory under retail inventory method – FIFO method: Determine the amount of ending inventory under retail inventory method – average method: Determine the amount of COGS under retail inventory method – LCNRV method:
Identify which of the following statement is correct for perpetual inventory system? Under the perpetual Inventory system, on the purchase of Inventory purchase account is debited. When valuing ending Inventory under a perpetual Inventory system, oldest units purchased during the period using FIFO are allocated to the cost of goods sold when units are sold. When valuing ending Inventory under a perpetual Inventory system, weighted average cost method requires that a new weighted average unit cost be calculated after every sale. 09/03/2024 15:01 When valuing ending Inventory under a perpetual Inventory system, valuation using weighted average is the same as the valuation using weighted average under the periodic Inventory system.
Required: Answer the following independent questions and show all computations supporting your answers. a) Assume that the company uses the FIFO method. The value of the ending inventory atDecember 31 is $__________. b) Assume that the company uses the LIFO method. The value of the ending inventory onDecember 31 is $__________.c) Determine the difference in the amount of income that the company would have reported if ithad used the FIFO method instead of the LIFO method. Would income have been greater orless? Which method would provide more tax advantage? -Explain your rationale.
The following are the inventories for the years 2019, 2020, and 2021 for Parry Company: 1. Assume the inventory that existed at the end of each year was sold in the subsequent year. Prepare journal entries to record ilie lower of cost or net realizable value for each of the following alternatives: a. allowance meiliod, perpetual inventory system b. direct meiliod, perpetual inventory system 2. Next Level Explain an)' differences in inventory valuation and income between the two meiliods.