INTERMEDIATE ACCOUNTING
3rd Edition
ISBN: 9780136946694
Author: GORDON
Publisher: RENT PEARS
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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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Air France–KLM (AF), a Franco-Dutch company, prepares its financial statements according to International Financial Reporting Standards. AF’s financial statements and disclosure notes for the year ended December 31, 2013, are provided with all new textbooks. This material also is available at www.airfranceklm-finance.com . Required: What method does the company use to value its inventory? What other alternatives are available under IFRS? Under U.S. GAAP?
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
$6,149…
A company uses ABC analysis to help manage its inventory. Its current stock of inventory reflects the following iterns, itern value and quantity.
Click the icon to view company's inventory database.
Find the percentage input to the total dollar value for each item (enter your responses rounded to one decimal place)
% Dollar Value
Item Part
142-AZ
More Info
W
Item Part
142-AZ
4392-GF
86935-ES
173-DC
999-BA
7846-NM
2765-OP
103-VX
2648-YT
Item Cost ($)
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
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 - Prob. 3SSCCh. 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 information [The following information applies to the questions displayed below.] Pacific Company sells electronic test equipment that it acquires from a foreign source. During the year, the inventory records reflected the following: Beginning inventory Purchases Units 22 42 Unit Cost $11,540 10,040 Total Cost $ 253,880 421,680 Sales (47 units at $24,670 each) Inventory is valued at cost using the LIFO inventory method. 2. The management, for various reasons, is considering buying 22 additional units before December 31 year-end at $9,540 each. Restate the income statement (and ending inventory), assuming that this purchase is made on December 31. Assume the LIFO method and the periodic inventory system are used by the company. PACIFIC COMPANY Income Statement For the Current Year Ended Sales revenue Cost of goods sold Gross profit Expenses 292,000 Pretax income Ending inventoryarrow_forwardRequired: How much is included by ZZZ as part of inventory?arrow_forwardSubject - Accountarrow_forward
- A. 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_forward1.5 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_forwardWhat is the correct balance of inventory as of December 31, 2018? What is the correct 2018 gross profit?arrow_forward
- Problem 1. How much is the adjusted inventory? * Makati Company is preparing its 2022 financial statements. Prior to any adjustments, inventory is valued at P1,605,000. During your audit, you found the following information relating to certain inventory transactions from your cutoff test. a. b. C. e. f. Goods valued at P110,000 are on consignment with a customer. These goods were not included in the ending inventory figure. d. A P35,000 shipment of goods to a customer on December 31, terms FOB destination was not included in the year-end inventory. The goods cost P26,000 and were delivered to the customer on January 8, 2023. The sale was properly recorded in 2023. g. Goods costing P87,000 were received from a vendor on January 5, 2023. The related invoice was received and recorded on January 12, 2023. The goods were shipped on December 31, 2022, terms FOB shipping point. Goods costing P85,000, sold for P102,000, were shipped on December 31, 2022, and were delivered to the customer on…arrow_forwardQUESTION 1 1.1 REQUIRED Complete the table for the transactions provided for each of the following methods of inventory valuation: FIFO Weighted Average Cost. (Round off the weighted average cost per unit to the nearest cent and all other amounts to the nearest Rand.) Purchased Date Quantity Price Value Issued/Returned Stock on hand Quantity Price Quantity Price Value Value INFORMATION The following information for March 2020 was extracted from the records of Monalisa Limited, a manufacturing company, for an inventory item used in one of its projects. Date Transaction details Opening inventory 01 2 000 units @ R17 each Purchased 02 48 000 units @ R18 each 15 10 000 units at R19.05 each 20 000 units @ R20 each Returned to supplier 10 000 damaged units (purchased 02 March) Transferred to the production department 30 000 units 22 03 04 17 15 000 units 25 20 000 units PROGRAMME HANDBOOK: JULY 2020 INTAKE MANCOSA: POSTGRADUATE DIPLOMA IN PROJECT MANAGEMENT 1.2 REQUIRED Use the information…arrow_forwardYou are examining the financial statements of France Company for the year ended December 31, 2022. It uses the physical inventory system of accounting for inventory. During your examination, you discovered that the goods received in December, 2022 at a cost of P 50,000 were recorded as purchases when paid in 2023. The goods were excluded from the 2022 ending inventory. Based on the foregoing, answer the following questions: Question 1: Which of the following accounts is(are) understated by P 50,000 at th end of year 2022 as a result of the error? , is(are) understated by P 50,000 at the | Select ] Select a. Purchases only b. Purchases and Inventory, December 31, 2022 c. Retained Earnings only d. Inventory , December 31. 2022 only Question 2: Which of the following accounts is(are) not affected by the error at the end of year 2022? [ Select] of the following accounts is(are) [ Select] a. Accounts Payable b. Retained Earnings c. Inventory, December 31, 2022 d. Purchases Question 3: Which…arrow_forward
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