In Last-in-First-Out method, the cost of last purchased items are sold first. The value of the closing stock consists the initial purchased items. To Explain: The LIFO reserve and its consequences if a company ignores a large LIFO reserve.

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Chapter 6, Problem 22Q

To determine

In Last-in-First-Out method, the cost of last purchased items are sold first. The value of the closing stock consists the initial purchased items.

To Explain: The LIFO reserve and its consequences if a company ignores a large LIFO reserve.

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The industrial enterprise "HUANG S.A." purchased a sorting and packaging machine from a foreign company on 1/4/2017 at a cost of €500,000. The useful life of the machine was estimated by the Management at ten (10) years, while the residual value was estimated at zero. For the transportation of the machine from abroad to the company's factory, the amount of €20,000 was paid on 15/4/2017. As the insurance coverage of the machine during transportation was the responsibility of the selling company, HUANG S.A. proceeded to insure the machine from 16/4/2017 to 15/4/2018, paying the amount of €1,200. The delivery took place on 15/4/2017. As adequate ventilation of the multifunction device is essential for its proper operation, the company fitted an air duct on the multifunction device. The cost of the air duct amounted to €2,000 and was paid on 20/4/2017. On 25/4/2017, an external electrician was paid €5,000 for the electrical connection of the device. The company also paid €5,000 to an…

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Answer 2

Question

Chapter 6, Problem 22Q

To determine

In Last-in-First-Out method, the cost of last purchased items are sold first. The value of the closing stock consists the initial purchased items.

To Explain: The LIFO reserve and its consequences if a company ignores a large LIFO reserve.

Expert Solution & Answer

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Check out a sample textbook solution

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Answer 3

Question

Chapter 6, Problem 22Q

To determine

In Last-in-First-Out method, the cost of last purchased items are sold first. The value of the closing stock consists the initial purchased items.

To Explain: The LIFO reserve and its consequences if a company ignores a large LIFO reserve.

Expert Solution & Answer

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Answer 4

Question

Chapter 6, Problem 22Q

To determine

In Last-in-First-Out method, the cost of last purchased items are sold first. The value of the closing stock consists the initial purchased items.

To Explain: The LIFO reserve and its consequences if a company ignores a large LIFO reserve.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 5

Chapter 6, Problem 22Q

To determine

In Last-in-First-Out method, the cost of last purchased items are sold first. The value of the closing stock consists the initial purchased items.

To Explain: The LIFO reserve and its consequences if a company ignores a large LIFO reserve.

Answer 6

Chapter 6, Problem 22Q

To determine

In Last-in-First-Out method, the cost of last purchased items are sold first. The value of the closing stock consists the initial purchased items.

To Explain: The LIFO reserve and its consequences if a company ignores a large LIFO reserve.

Answer 7

Chapter 6, Problem 22Q

To determine

In Last-in-First-Out method, the cost of last purchased items are sold first. The value of the closing stock consists the initial purchased items.

To Explain: The LIFO reserve and its consequences if a company ignores a large LIFO reserve.

Answer 8

Expert Solution & Answer

Answer 9

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Answer 10

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Answer 11

Ch. 6 - The key to successful business operations is...Ch. 6 - Prob. 2Q Ch. 6 - What is just-in-time inventory management? What...Ch. 6 - Prob. 4Q Ch. 6 - Prob. 5Q Ch. 6 - Prob. 6Q Ch. 6 - Prob. 7Q Ch. 6 - Prob. 8Q Ch. 6 - What is the major advantage and major disadvantage...Ch. 6 - The selection of an inventory cost flow method is...

In Last-in-First-Out method, the cost of last purchased items are sold first. The value of the closing stock consists the initial purchased items. To Explain: The LIFO reserve and its consequences if a company ignores a large LIFO reserve.

Solution Summary: The author explains the LIFO reserve and its consequences if a company ignores it.

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In Last-in-First-Out method, the cost of last purchased items are sold first. The value of the closing stock consists the initial purchased items.

To Explain: The LIFO reserve and its consequences if a company ignores a large LIFO reserve.

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