Cost Accounting (15th Edition)
15th Edition
ISBN: 9780133428704
Author: Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 16, Problem 16.10Q
How might a company simplify its use of the NRV method when final selling prices can vary sizably in an
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Students have asked these similar questions
a) Compare the periodic versus the perpetual system as a control device.
b) What sort of organisations are likely to use the periodic inventory system?What kind of organisations will prefer to use perpetual inventory system?c) If management overstated the valuation of inventory, would it affect profit for the year?
How should accounting be able to catch up with the high sales return rates, particularly on inventory management?
Which statements below are true?
1. LCM and LCNRV may be applied by individual products, by product category or by total inventory.
2. A firm that wants to minimize the negative impact of inventory write-down on net income should apply LCM or LCNRV by individual products.
3. If inventory write-down is usual and not substantial, a firm should debit "Loss on inventory write-down” and credit "Inventory".
4. LCM and LCNRV applied by total inventory will result in higher value of inventory and lower inventory write-down than by individual products, by product category.
5. If inventory write-down is unusual and substantial, a firm should debit "Cost of good sold" and credit "Inventory".
Chapter 16 Solutions
Cost Accounting (15th Edition)
Ch. 16 - Give two examples of industries in which joint...Ch. 16 - What is a joint cost? What is a separable cost?Ch. 16 - Distinguish between a joint product and a...Ch. 16 - Why might the number of products in a joint-cost...Ch. 16 - Provide three reasons for allocating joint costs...Ch. 16 - Why does the sales value at splitoff method use...Ch. 16 - Prob. 16.7QCh. 16 - Distinguish between the sales value at splitoff...Ch. 16 - Give two limitations of the physical-measure...Ch. 16 - How might a company simplify its use of the NRV...
Ch. 16 - Why is the constant gross-margin percentage NRV...Ch. 16 - Managers must decide whether a product should be...Ch. 16 - Prob. 16.13QCh. 16 - Describe two major methods to account for...Ch. 16 - Why might managers seeking a monthly bonus based...Ch. 16 - Prob. 16.16ECh. 16 - Prob. 16.17ECh. 16 - Prob. 16.18ECh. 16 - Prob. 16.19ECh. 16 - Prob. 16.20ECh. 16 - Prob. 16.21ECh. 16 - Prob. 16.22ECh. 16 - Prob. 16.23ECh. 16 - Prob. 16.24ECh. 16 - Joint costs and decision making. Jack Bibby is a...Ch. 16 - Joint costs and byproducts. (W. Crum adapted)...Ch. 16 - Prob. 16.27PCh. 16 - Prob. 16.28PCh. 16 - Prob. 16.29PCh. 16 - Prob. 16.30PCh. 16 - Prob. 16.31PCh. 16 - Prob. 16.32PCh. 16 - Prob. 16.33PCh. 16 - Prob. 16.34PCh. 16 - Prob. 16.35PCh. 16 - Prob. 16.36PCh. 16 - Methods of joint-cost allocation, comprehensive....
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- Companies set reorder points based upon what criterion? a. All of these choices b. Normal sales/depletion of the item c. Delivery time from the vendor d. Safety stock for unexpected fluctuations in demandarrow_forwardIf the standalone selling price of a good or service is not readily observable, what approaches might a company use to obtain an estimate of the stand-alone selling price?arrow_forwardA high inventory turnover ratio provides evidence that a company is having problems with stockouts and disgruntled customers. Do you agree? Explain.arrow_forward
- 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.arrow_forwardWhich of the following statement is not valid as it applies to inventory costing method? A) If inventory quanities are to be maintained, part of the earning must be invested (plowed back) in inventories when FIFO is used during a period of rising prices. B) LIFO tends to smooth ou the net income patterns by matching currents cost of goods sold with current revenue, when inventories remain at costant quantities. C) When a firm using the LIFO method fails to maintain its usual inventory position (reduces stock on hand below customary levels), there may be a matching of old cost with current revenue. D) The use of FIFO permits some control by managment over the amount of net income for a period through controlled purchase, which is not true with LIFO.arrow_forwardRevenue recognition in the Xerox case called for determining the stand-alone selling price for each of the deliverables and using it to separate out the revenue amounts. Why do you think it is important to separate out the selling prices of each element of a bundled transaction? How do these considerations relate to what Xerox did to manage its earnings? Do you think the new revenue recognition standard will change the criteria in accounting for transactions like at Xerox?arrow_forward
- Which of the following is not a disadvantage of the LIFO inventory cost flow assumption? a. The impact of LIFO liquidation profits b. It does not match the most recent costs with revenue c. The possibility of income manipulation by management d. It impairs comparability between companies using LIFOarrow_forwardExplain the purpose of the inventory turnover ratio? Is it possible for a firm to have a high current ratio and still have difficulty paying its current bills? Why or why not?arrow_forwardWhat are the implications and accounting treatment for a company transitioning from LIFO (Last-In, First-Out) inventory valuation to FIFO (First-In, First-Out) during a period of rising inventory costs?arrow_forward
- Which of the following statements regarding the lower of cost and net realizable value (LCNRV) rule is true? a.The LCNRV rule is an application of the cost principle. b.When the net realizable value of inventory drops below the cost of inventory, an adjustment is made to decrease inventory to its net realizable value and decrease income. c.If a company uses the LCNRV rule, there is no need to use a cost flow assumption such as FIFO, or weighted average cost. d.When the net realizable value of inventory is above the cost of inventory, an adjustment is made to increase inventory to its net realizable value and increase income.arrow_forward(ATTEMPT ALL THREE Questions)a) Compare the periodic versus the perpetual system as a control device. b) What sort of organisations are likely to use the periodic inventory system?What kind of organisations will prefer to use perpetual inventory system? c) If management overstated the valuation of inventory, would it affect profit for the year? (Use your own words to avoid from plagirism)arrow_forwardExplain the impact on a company's financial statements if it shifts from using the historical cost principle to using the revaluation model. What adjustments should be made to the financial statements to reflect this change?arrow_forward
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INVENTORY & COST OF GOODS SOLD; Author: Accounting Stuff;https://www.youtube.com/watch?v=OB6RDzqvNbk;License: Standard Youtube License