the ending inventory of a firm is overstated by $49,000, by how much and in what direction (overstated or understated) will e firm's operating income be misstated? (Hint: Use the cost of goods sold model, enter hypothetically "correct" data, and en reflect the effects of the ending inventory error and determine the effect on cost of goods sold.) Operating income by overstated

the ending inventory of a firm is overstated by $49,000, by how much and in what direction (overstated or understated) will e firm's operating income be misstated? (Hint: Use the cost of goods sold model, enter hypothetically "correct" data, and en reflect the effects of the ending inventory error and determine the effect on cost of goods sold.) Operating income by overstated

Name: Exercise 9-7 (Algo) Effects of inventory error LO 2If the ending inve
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Description: Exercise 9-7 (Algo) Effects of inventory error LO 2If the ending inventory of a firm is overstated by $49,000, by how much and in what direction (overstated or understated) willthe firm's operating income be misstated? (Hint: Use the cost of goods s

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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The original cost of an item of inventory is above its replacement cost. The item s replacement cost is below its net realizable value but is higher than its net realizable value minus a normal profit. Under the lower of cost or market method, the inventory item should be valued at: a. Net realizable value. b. Original cost. c. Replacement cost. d. Net realizable value less normal profit margin.
Indicate the effects of the transactions listed, on current assets, current ratios and net income. Use (increase) to indicate an increase, (decrease) to indicate a decrease and (no effect) to indicate no effect or an indeterminate effect. A fully depreciated asset is retired. Net income will experience Choose. Merchandise is sold for cash. Total current assets will Choose. An increase in inventory turnover ratio signifies Choose. in a firm's efficiency. A fixed asset is sold for more than book value. Net income will Choose.
1. At the end of a period, the inventory account is _______. 2. Gross sales less sales discounts and sales returns and allowances equals____. 3. When an unearned, The revenue will go____. 4. Sales returns and allowances are used in calculating _______. 5. Ending inventory represents goods not yet ________. 6. Inventory is increased by a _______.
Applying the lower-of-cost-or-market approach, what is the correct value that should be reported on the balance sheet for the inventory?
FIFO and weighted average. But what if a company wants to use LIFO to report its inventory because of the significant tax benefit? How could dollar-value LIFO help them use FIFO for managerial purposes but LIFO for financial statement reporting?
Which of the following statements Is/are true? Multiple Cholce In a period of rising costs and stable inventory levels, using the FIFO method leads to a higher taxable income and higher net income compared to the LIFO method. All of the other answer choices are true. In a period of falling costs and stable inventory levels, cost of goods sold is the same under LIFO and FIFO. In a period of rising costs and stable inventory levels, using the LIFO method leads to a lower taxable income and higher net income compared to the FIFO method.
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Companies can use various methods to determine the cost of inventory, including FIFO, LIFO, and average cost. In a period in which the cost of inventory is rising, which of the following statements is true? The LIFO method will result in the lowest income tax expense. The LIFO method will result in the highest inventory balance at year-end. The average cost method will result in the highest net income. The LIFO method will result in the lowest cost of goods sold. The average cost method will result in the lowest inventory balance at year-end. The average cost method will result in the highest inventory balance at year-end. The FIFO method will result in the lowest net income. None of the listed choices are correct.
A firm that uses LIFO accounting for inventory in times of rising investory costs will always report lower profit margins than if it used FIFO. Is this correct?
Which one of the following statements is true? a. Income manipulation is difficult under LIFO.b. Accounting principles do not require that the inventory cost flow approximate the physical flow of goods.c. Companies may use LIFO for tax purposes and FIFO in the financial statements.d. In periods of declining prices, LIFO will result in the payment of less income taxes.
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