Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Textbook Question
Chapter 3, Problem 2SSC
Surfing the Standards Case 2: Inventory Disclosures
Abtos Company is a U.S. manufacturer that is publicly traded. Abtos reports $12 million of inventory on its
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Analyzing an Inventory Footnote Disclosure
The inventory footnote from Deere & Company's 2018 10-K follows.
Inventories A majority of inventory owned by Deere & Company and its U.S. equipment subsidiaries are valued at cost, on the "last-in, first-
out" (LIFO) basis. Remaining inventories are generally valued at the lower of cost, on the "first-in, first-out" (FIFO) basis, or net realizable value.
The value of gross inventories on the LIFO basis at October 28, 2018, and October 29, 2017, represented 54 percent and 61 percent,
respectively, of worldwide gross inventories at FIFO value. If all inventories had been valued on a FIFO basis, estimated inventories by major
classification at October 28, 2018, and October 29, 2017, in millions of dollars would have been as follows:
S millions
2018
2017
Raw materials and supplies
$2,233 $1,688
Work-in-process
776
495
4,777 3,182
7,786 5,365
Finished goods and parts
Total FIFO value
Less adjustment to LIFO value 1,637 1,461
Inventories
$6,149…
Access the company’s investor relations website or the SEC's EDGAR database (www.sec.gov/edgar.shtml).
Impact of Inventory Management on Financial Statements: Analyze how variations in inventory management practices impact a company's financial statements, specifically focusing on the Income Statement and Balance Sheet. Discuss how changes in inventory levels affect Cost of Goods Sold (COGS), Gross Profit, and Net Income. Use specific examples or excerpts from the same two (2) Annual Reports (Form 10-K) to support your analysis.
Discuss the challenges companies face when valuing their inventories for financial reporting purposes. How might different inventory valuation methods (e.g., FIFO, LIFO, weighted average) impact the accuracy of financial statements? Use examples or excerpts from the same two (2) Annual Reports (Form 10-K) to illustrate your points.
Comparative Analysis Across Industries: Compare the inventory turnover ratios and inventory management practices of two…
A company uses ABC analysis to help manage its inventory. Its current stock of inventory reflects the following iterns, itern value and quantity.
Click the icon to view company's inventory database.
Find the percentage input to the total dollar value for each item (enter your responses rounded to one decimal place)
% Dollar Value
Item Part
142-AZ
More Info
W
Item Part
142-AZ
4392-GF
86935-ES
173-DC
999-BA
7846-NM
2765-OP
103-VX
2648-YT
Item Cost ($)
564
46
16.00
647
193
20
367
11.50
16.50
Quantity
In-Stock
330
1,291
3,521
1,856
509
993
809
4,818
5,134
P
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Chapter 3 Solutions
Intermediate Accounting (2nd Edition)
Ch. 3 - Prob. 3.1QCh. 3 - Prob. 3.2QCh. 3 - Does U.S. GAAP require that companies disclose...Ch. 3 - Does IFRS require that companies disclose...Ch. 3 - Prob. 3.5QCh. 3 - Does IFRS require that companies disclose their...Ch. 3 - Prob. 3.7QCh. 3 - Prob. 3.8QCh. 3 - Prob. 3.9QCh. 3 - Prob. 3.10Q
Ch. 3 - Prob. 3.11QCh. 3 - What is the Basis for Conclusions and where can...Ch. 3 - Prob. 3.13QCh. 3 - Prob. 3.14QCh. 3 - Prob. 3.1BECh. 3 - Judgment in Accounting for Plant and Equipment....Ch. 3 - Match Each Cognitive Bias Below with its...Ch. 3 - Prob. 3.4BECh. 3 - Prob. 3.5BECh. 3 - Prob. 3.6BECh. 3 - Prob. 3.7BECh. 3 - Codification Research. Referencing Appendix A,...Ch. 3 - Prob. 3.9BECh. 3 - Prob. 3.10BECh. 3 - Exercises E3-1. Accounting Policy Disclosures. To...Ch. 3 - Cognitive Bias. A team of accounting students is...Ch. 3 - Cognitive Bias. A team of accounting students is...Ch. 3 - Authoritative Literature. Provide the reference to...Ch. 3 - Authoritative Literature. Provide the reference to...Ch. 3 - Authoritative Literature. To what entity types...Ch. 3 - Authoritative Literature. How does FASB define...Ch. 3 - Prob. 3.8ECh. 3 - Prob. 1JCCh. 3 - Prob. 2JCCh. 3 - Prob. 1SSCCh. 3 - Surfing the Standards Case 2: Inventory...Ch. 3 - Basis for Conclusions Case 1: Judgment and...Ch. 3 - Basis for Conclusions Case 2: Income Statement or...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Consider each of the following independent situations. Should a company report the goods in its inventory? (a) Goods purchased by the company with shipping terms FOB shipping point that are in transit at the end of the year (b) Goods received by the company on consignment (c) An estimate of the amount of goods sold by the company that it expects the buyer to return (d) Goods required to be purchased by the company under an unconditional purchase obligationarrow_forwardInventory 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?arrow_forwardInventory 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?arrow_forward
- Required: How much is included by ZZZ as part of inventory?arrow_forwardSubject - Accountarrow_forwardA. Assuming that the company had the following beginning balances in its allowance for inventory write down accounts: FG – P60,000; WIP – P0; RM – P60,000, what is the total loss on inventory write-down to be recognized for the year?B.arrow_forward
- 1.5 From the information provided below complete the table using the FIFO method of inventory valuation: Date Quantity Price Amount Quantity Price Amount Quantity Price Amount Date Transaction 01 The following transactions of Franco Manufacturers took place during March 2022: 05 12 Purchased 24 16 28 Opening inventory Purchased from a supplier Purchased from a supplier Purchased from a supplier Issues and returns Issued to production Issued to production Units 1600 600 1 300 1600 Balance 1800 1 300 Price per unit R3.50 R4.00 R4.50 R5.00 ? ?arrow_forwardMatch the accounting terminology to the definitions. A(Click the icon to view the definitions.) More Info - X Term Definition 1. Cost of Goods Sold 2. Perpetual inventory system An inventory system that requires businesses to obtain a physical count of inventory to а. 3. Vendor determine quantities on hand. 4. Periodic inventory system Expenses, other than Cost of Goods Sold, that are incurred in the entity's major b. 5. Operating expenses ongoing operations. 6. Gross profit Excess of Net Sales Revenue over Cost of Goods Sold C. d. The cost of merchandise inventory that the business has sold to customers. The individual or business from whom a company purchases goods. е. f. An inventory system that keeps a running computerized record of merchandise inventory Print Donearrow_forwardWhat is the correct balance of inventory as of December 31, 2018? What is the correct 2018 gross profit?arrow_forward
- From the information provided below can you please complete the given table using the FIFI method of inventory valuation.arrow_forwardDomesticarrow_forwardWhen comparing a US company that uses the last in, fi rst out (LIFO) method of inventory with companies that prepare their fi nancial statements under international fi nancialreporting standards (IFRS), analysts should be aware that according to IFRS, the LIFOmethod of inventory:A . is never acceptable.B . is always acceptable.C . is acceptable when applied to fi nished goods inventory onlyarrow_forward
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