EBK COST ACCOUNTING
15th Edition
ISBN: 9780133812763
Author: Rajan
Publisher: VST
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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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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".
Why might a company choose not to use revaluation accounting?
Chapter 16 Solutions
EBK COST ACCOUNTING
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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- If 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_forwardWhich 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_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_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_forward
- Explain 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_forwardWhich of the following statements is true regarding the lower of cost or net-realizable value (NRV)? I. Firms have the option whether to apply this accounting method. II. Firms can reduce the cost of inventory but not increase it. III. If the NRV is lower, the entry recorded reduces total assets.arrow_forwardWhy may companies not be indifferent to purchase and pooling accounting?arrow_forward
- Which of the following statements is true? Select one: a. The cost flow assumption used must match the physical flow of goods through the firm. b. Firms that use LIFO for tax purposes must also use it for book purposes. c. The Weighted Average Method can lead to phantom profits in periods of rising prices. d. There is a big difference in CGS for the different methods when a firm has high inventory turnover. PreviousSave AnswersNextarrow_forwardDuring a period of rising inventory costs and stable output prices, describe how net income and total assets would differ depending upon whether LIFO or FIFO is applied. Explain how your answer would change if the company is experiencing declining inventory costs and stable output prices.arrow_forwardWhat is a sensible credit period? Should the credit period for your company's sales vary depending on the industry in which you are operating?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