Fundamentals of Advanced Accounting
6th Edition
ISBN: 9780077862237
Author: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 5, Problem 5Q
James, Inc., sells inventory to Matthews Company, a related party, at James’s standard gross profit rate. At the current fiscal year-end, Matthews still holds some portion of this inventory. If consolidated financial statements are prepared, why are worksheet entries required in two different fiscal periods?
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Blue Devil Inc. uses the LIFO inventory costing method for both tax reporting and financial reporting purposes. Blue Devil’s inventories are reported at $50 million on its balance sheet. In its footnotes, Blue Devil is required to report the amount at which inventories would have been reported under FIFO method. The difference between these two numbers is referred to as what?
Group of answer choices
LIFO holding gain
LCM disclosures
LIFO reserve
LIFO liquidation
2. Using the information provided in
the image below, determine the
carrying amount of the inventory that
S Company purchased from P
Company in the December 31, 2019
consolidated Statement of financial
position. *
Selected information from the separate and consolidated statements of financial position and statements of
comprehensive income of P Company. and its subsidiary, S Company., as of December 31, 2019, and for the
year then ended is as follows:
P Company
S Company
Consolidated
Statement of financial position accounts
Accounts receivable. .
Inventory....
Investment in S Co...
Goodwill.
P 42,000
50,000
P 26,000
P19,000
25.000
30,000
67.000
Noncontrolling interest..
Stockholders' equity..
30,000
10,000
154,000
154,000
50,000
Statement of comprehensive income accounts
Revenues...
Cost of goods sold.
Gross profit.
P300,000
225.000
75,000
P200,000
P140,000
150,000
50,000
110,000
30,000
Equity in earnings of S Co.
Net income..
P9.000
P36,000
P20,000
P36,000
Additional information…
Chapter 5 Solutions
Fundamentals of Advanced Accounting
Ch. 5 - Prob. 1QCh. 5 - Prob. 2QCh. 5 - Prob. 3QCh. 5 - Prob. 4QCh. 5 - James, Inc., sells inventory to Matthews Company,...Ch. 5 - Prob. 6QCh. 5 - Prob. 7QCh. 5 - Prob. 8QCh. 5 - Prob. 9QCh. 5 - Prob. 10Q
Ch. 5 - Prob. 11QCh. 5 - Prob. 12QCh. 5 - Prob. 13QCh. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - Prob. 3PCh. 5 - Prob. 4PCh. 5 - Prob. 5PCh. 5 - Use the same information as in problem (5) except...Ch. 5 - Prob. 7PCh. 5 - Prob. 8PCh. 5 - Prob. 9PCh. 5 - Prob. 10PCh. 5 - What is the total of consolidated cost of goods...Ch. 5 - Prob. 12PCh. 5 - Prob. 13PCh. 5 - Prob. 14PCh. 5 - What is the consolidated total for inventory at...Ch. 5 - Prob. 16PCh. 5 - Prob. 17PCh. 5 - Prob. 18PCh. 5 - Prob. 19PCh. 5 - Prob. 20PCh. 5 - Prob. 21PCh. 5 - Prob. 22PCh. 5 - Prob. 23PCh. 5 - Prob. 24PCh. 5 - Prob. 25PCh. 5 - Prob. 26PCh. 5 - Prob. 27PCh. 5 - Prob. 28PCh. 5 - Prob. 29PCh. 5 - Prob. 30PCh. 5 - Prob. 31PCh. 5 - Prob. 32PCh. 5 - Prob. 33PCh. 5 - Prob. 34PCh. 5 - Prob. 35PCh. 5 - Prob. 36PCh. 5 - Prob. 1DYSCh. 5 - Prob. 2DYS
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- 2. Using the information provided in the image below, determine the carrying amount of the inventory that S Company purchased from P Company in the December 31, 2019 consolidated Statement of financial position. * Selected information from the separate and consolidated statements of financial position and statements of comprehensive income of P Company. and its subsidiary, S Company., as of December 31, 2019, and for the year then ended is as follows: P Company S Company Consolidated Statement of financial position accounts Accounts receivable. . Inventory.... Investment in S Co.. Goodwill. Noncontrolling interest... Stockholders' equity... P 26,000 30,000 67,000 P19,000 25,000 P 42,000 50,000 30,000 10,000 154,000 154,000 50,000 Statement of comprehensive income accounts P200,000 150,000 50,000 P140,000 110,000 30,000 P300,000 225,000 75,000 Revenues.. Cost of goods sold.. Gross profit. Equity in earnings of S Co. Net income... P9,000 P36,000 P20,000 P36,000 Additional information…arrow_forwardAt the beginning of current year, Black Company changed the inventory cost flow method to FIFO from weighted average method for both financial statement and income tax reporting purposes. The change resulted in a P600,000 increase in the beginning inventory. Ignoring income tax, the accounting change should be reported in the current year: a. Income statement as of P600,000 debit b. Retained earnings statement as a P600,000 debit adjustment to the beginning balance. c. Income statement as a P600,000 credit. d. Retained earnings statement as a P600,000 credit adjustment to the beginning balance.arrow_forwardBelow is the net income of Anita Ferreri Instrument Co., a private corporation, computed under the three inventory methods using a periodic system. FIFO Average-Cost LIFO 2018 $26,000 $24,000 $20,000 2019 30,000 25,000 21,000 2020 28,000 27,000 24,000 2021 34,000 30,000 26,000 Instructions (Ignore tax considerations.) a. Assume that in 2021 Ferreri decided to change from the FIFO method to the average-cost method of pricing inventories. Prepare the journal entry necessary for the change that took place during 2021, and show net income reported for 2018, 2019, 2020, and 2021. b. Assume that in 2021 Ferreri, which had been using the LIFO method since incorporation in 2018, changed to the FIFO method of pricing inventories. Prepare the journal entry necessary to record the change in 2021 and show net income reported for 2018, 2019, 2020, and 2021.arrow_forward
- What is the Total noncurrent assets?arrow_forward2. Using the information provided in the image below, determine the carrying amount of the inventory that S Company purchased from P Company in the December 31, 2019 consolidated Statement of financial position.arrow_forwardOn January 1, 2021, Blossom Corp. changed its inventory method to FIFO from LIFO for both financial and income tax reporting purposes. The change resulted in a $910000 increase in the January 1, 2021 inventory. Assume that the income tax rate for all years is 30%. Assuming that comparative statements are not issued, the cumulative effect of the accounting change should be reported by Blossom in its 2021 income statement as a $637000 cumulative effect of accounting change. retained earnings statement as a $910000 addition to the beginning balance. retained earnings statement as a $637000 addition to the beginning balance. income statement as a $910000 cumulative effect of accounting change.arrow_forward
- Vaughn Inc. reported total assets of $6407000 and net income of $505000 for the current year. Vaughn determined that inventory was understated by $140000 at the beginning of the year and $60800 at the end of the year. Ignoring income taxes, what is the corrected amount for total assets and net income for the year? $6407000 and $505000. $6467800 and $425800. $6467800 and $565800. $6346200 and $584200.arrow_forwardAt the balance sheet date, Clarkson Company held title to goods in transit amounting to $214,000. This amount was omitted from the purchases figure for the year and also from the ending inventory. What is the effect of this omission on the net income for the year as calculated when the books are closed? What is the effect on the company's financial position as shown in its balance sheet? Is materiality a factor in determining whether an adjustment for this item should be made?arrow_forwardOn 1/1/21, Shaye Corp. changed its inventory method to FIFO from LIFO for both financial and income tax reporting purposes. The change resulted in a $970k increase in the 1/1/21 inventory. Assume that the income tax rate for all years is 30%. Assuming that comparative statements are not issued, the cumulative effect of the accounting change should be reported by Shaye in its 2021...arrow_forward
- During year 3, Mayorca Corp. decided to change from the FIFOmethod of inventory valuation to the weighted-average method. Inventory balances under each method were as follows: FIFO Weighted-average January 1, year 3 P71,000 P77,000 December 31, year 3 79,000 83,000 Orca’s income tax rate is 30%. In its year 3 financial statements, what amount should Mayorca report as the gain or loss on the cumulative effect of this accounting change?arrow_forwardWhich of the following statements is not true concerning interim financial reporting and inventories? A company that uses LIFO and encounters a temporary partial a) liquidation of its base period inventory must include the effects of the liquidation in the period in which it occurred. b) Provisions for write-downs to market should generally be the same for both the annual and interim reporting. A company that utilizes a periodic inventory system and uses c) estimated gross profit rates to determine costs of goods sold during interim periods should disclose any significant adjustments that result from reconciliation with the annual physical inventory. d) The same inventory pricing method used for annual reporting should generally be used for interim reporting.arrow_forwardRequirements: a. What is the cumulative effect of this accounting change? b. What is the entry to record the effect of this accounting change?arrow_forward
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