In previous financial statements Mega Supermarkets Ltd valued its inventory on a weighted average basis. This year it has decided to account for it on a first-in, first-out (FIFO) basis. How should Mega Supermarkets account for this change? O a. Prospectively as it is a change in accounting policy O b. Prospectively as it is a change in estimate O c. Retrospectively as it is a change in accounting policy O d. Retrospectively as it is a correction of an error O C ASUS ZenBook 0/R

In previous financial statements Mega Supermarkets Ltd valued its inventory on a weighted average basis. This year it has decided to account for it on a first-in, first-out (FIFO) basis. How should Mega Supermarkets account for this change? O a. Prospectively as it is a change in accounting policy O b. Prospectively as it is a change in estimate O c. Retrospectively as it is a change in accounting policy O d. Retrospectively as it is a correction of an error O C ASUS ZenBook 0/R

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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When inventory is adjusted down, what is the impact on the balance sheet? a. The value of the asset, Merchandise Inventory, is restated at a more conservative number. b. The value of the asset, Merchandise inventory, is increased to reflect a more optimistic outlook. c. The value of the liability, Selling Expense, would be decreased to reflect a more conservative outlook. d. The value of the liability, Operating Expenses, would be increased to reflect the loss. You are an accountant for ACME Corporation working on inventory valuation. What would prevent you from using LCNRV to adjust the value of your inventory? a. If ACME uses NIFO. b. If ACME uses LIFO to cost inventory. c. If ACME uses FIFO to cost inventory. d. If the Cost of Goods Sold exceeds last quarter’s COGS.
Accountants at UltraTech obtain their values for inventory and total assets, calculate the balance sheet percentage by dividing inventory by total assets for each year and summarize the observations for the relative size of inventory to total assets for each year and percentage change from year-to-year. This would allow them to effectively assess: a. Inventory control compared to competitorsb. If there is an effective return on assetsc. If inventory is being properly managedd. How they are managing liabilities
Aa 129.
- List and explain the substantive tests of Inventory and give example.
A3
1. Express the balance sheets in common-size percents. 2. Assuming annual sales have not changed in the last three years, is the change in accounts receivable as a percentage of total assets favorable or unfavorable? 3. Assuming annual sales have not changed in the last three years, is the change in merchandise inventory as a percentage of total assets favorable or unfavorable? Complete this question by entering your answers in the tabs below. Req 1 Req 2 and 3 Express the balance sheets in common-size percents. (Do not round intermediate calculations and round your final percentage answers to 1 decimal place.) Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets Common-Size Comparative Balance Sheets December 31 Liabilities and Equity Accounts payable SIMON COMPANY Long-term notes payable Common stock, $10 par Retained earnings Total liabilities and equity Current Year % % % % 1 Year Ago 2 Years Ago
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