General Account Brady Corporation values its inventory at the lower of cost or net realizable value as required by IFRS. Brady has the following information regarding its inventory: Historical cost $1,000 Estimated selling price $900 Estimated costs to complete and sell $50 Replacement cost $800 What is the amount for inventory that Brady should report on the balance sheet under the lower of cost or net realizable value method? a. $1,000 b. $ 900 c. $ 850 d. $ 750

General Account Brady Corporation values its inventory at the lower of cost or net realizable value as required by IFRS. Brady has the following information regarding its inventory: Historical cost $1,000 Estimated selling price $900 Estimated costs to complete and sell $50 Replacement cost $800 What is the amount for inventory that Brady should report on the balance sheet under the lower of cost or net realizable value method? a. $1,000 b. $ 900 c. $ 850 d. $ 750

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

Chapter8: Inventories: Special Valuation Issues

Section: Chapter Questions

Problem 2RE: Black Corporation uses the LIFO cost flow assumption. Each unit of its inventory has a net...

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Inventory Write-Down The following information is taken from Aden Companys records: Required: 1. What is the correct inventory value if the company applies the LCNRV rule to each of the following? a. individual items b. groups of items c. the inventory as a whole 2. Next Level Are there any conditions under which a company may ignore the decline in the value of inventory below its cost?
Lower of Cost or Market The accountant for Murphy Company prepared the following analysis of its inventory at year end: Required: 1. Compute the carrying value of the ending inventory using the lower of cost or market method applied on an item-by-item basis. 2. Prepare the journal entry required to value the inventory at lower of cost or market.
Lower of Cost or Market Garcia Company uses FIFO, and its inventory at the end of the year was recorded in the accounting records at $17,800. Due to technological changes in the market, Garcia would be able to replace its inventory for $16,500. Required: 1. Using the lower of cost or market method, what amount should Garcia report for inventory on its balance sheet at the end of the year? 2. Prepare the journal entry required to value the inventory at the lower of cost or market.
Inventory Write-Down The following information for Tuell Company is available: Required: 1. Assume Tuell uses the LIFO cost flow assumption. What is the correct inventory value in each of the preceding situations under U.S. GAAP? 2. Assume Tuell uses the average cost inventory cost flow assumption. What is the correct inventory value in each of the preceding situations under U.S. GAAP? 3. Assume that Tuell uses the average cost inventory cost flow assumption. What is the correct inventory value in each of the preceding situations if Tuell uses IFRS?
Inventory Write-Down Stiles Corporation uses the FIFO cost flow assumption and is in the process of applying the LCNRV rule for each of two products in its ending inventory. A profit margin of 30% on the selling price is considered normal for each product. Specific data for each product are as follows: Inventory Write-Down Use the information in E8-1. Assume that Stiles uses the LIFO cost flow assumption and is applying the LCM rule. Required: 1. What is the correct inventory value for each product? 2. Next Level With regard to requirement 1, what effect does the imposition of the constraints on market value have on the inventory valuations?
Retail Inventory Method The following information relates to the retail inventory method used by Jeffress Company: Required: 1. Compute the ending inventory by the retail inventory method using the following cost flow' assumptions (round the cost-to-retail ratio to 3 decimal places): a. FIFO b. average cost c. LIFO d. lower of cost or market (based on average cost) 2. Next Level What assumptions are necessary for the retail inventory method to produce accurate estimates of ending inventory?
Inventory Valuation Specific identification method Weighted average cost method FIFO method LIFO method LIFO liquidation LIFO conformity rule LIFO reserve Replacement cost Inventory profit Lower-of-cost-or-market (LCM) rule Inventory turnover ratio Number of days sales in inventory Moving average (Appendix) The name given to an average cost method when a weighted average cost assumption is used with a perpetual inventory system. An inventory costing method that assigns the same unit cost to all units available for sale during the period. A conservative inventory valuation approach that is an attempt to anticipate declines in the value of inventory before its actual sale. An inventory costing method that assigns the most recent costs to ending inventory. The current cost of a unit of inventory. An inventory costing method that assigns the most recent costs to cost of goods sold. A measure of how long it takes to sell inventory. The IRS requirement that when LIFO is used on a tax return, it must also be used in reporting income to stockholders. An inventory costing method that relies on matching unit costs with the actual units sold. The portion of the gross profit that results from holding inventory during a period of rising prices. The result of selling more units than are purchased during the period, which can have negative tax consequences if a company is using LIFO. The excess of the value of a companys inventory stated at FIFO over the value stated at LIFO. A measure of the number of times inventory is sold during the period.
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Lower of Cost or Market Merediths Appliance Store has the following data for the items in its inventory at the end of the accounting period: Required: 1. Compute the carrying value of Merediths ending inventory using the lower of cost or market rule applied on an item-by-item basis. 2. Prepare the journal entry required to value the inventory at lower of cost or market. 3. CONCEPTUAL CONNECTION What is the conceptual justification for valuing inventory at the lower of cost or market?
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Ruan Shipping Co. follows the practice of pricing its inventory at the lower-of-cost-or-market, on an individual-item basis. From the information included below, determine (a) the amount of the write-off required Ruan to record inventory at the lower-of-cost-or-market and (b) the final value of Ruan's inventory. Item Qua Cost Cost to Est. Cost to Normal 1320 1,200 $ 3.20 $ 3.00 $ 4.50 $ 0.35 $ 1.25 1333 900 $ 2.70 $ 2.30 $ 3.40 $0.50 $0.50 1426 800 $ 4.50 $ 3.70 $5.00 $ 0.40 $ 1.00 1427 1,000 $ 3.60 $ 3.10 $ 3.20 $ 0.45 $ 0.90 1510 700 $2.25 $ 2.00 $3.25 $ 0.80 $ 0.60 1522 500 $ 3.00 $ 2.70 $ 3.90 $ 0.40 $0.50 1573 3,000 $ 1.80 $ 1.60 $ 2.50 $ 0.75 $0.50 1626 1,000 $ 4.70 $5.20 $ 6.00 $ 0.50 $ 1.00
Jenks Company developed the following information about its inventories in applying the lower-of-cost-or-net-realizabl e-value(LCNRV) basis in valuing inventories: Product Cost NRV A $114,000 $120,000 B 80,000 76,000 C 160,000 162,000 After Jenks applies the LCNRV rule, the value of the inventory reported on the balance sheet would be