First-in-First-Out: In First-in-First-Out method, the costs of the initially purchased items are considered as cost of goods sold, for the items which are sold first. The value of the ending inventory consists of the recent purchased items. Last-in-Last-Out: In Last-in-First-Out method, the costs of last purchased items are considered as the cost of goods sold, for the items which are sold first. The value of the closing stock consists of the initial purchased items. The Income statement: The income statement is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned, and expenses incurred by the company over a specific period of time. An income statement is also known as an operation statement, an earning statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses. To Prepare: The comparative condensed income statements for 2015 under FIFO and LIFO.

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Answer 1

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Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 6, Problem 6.7BP

(a)

To determine

First-in-First-Out:

In First-in-First-Out method, the costs of the initially purchased items are considered as cost of goods sold, for the items which are sold first. The value of the ending inventory consists of the recent purchased items.

Last-in-Last-Out:

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

The Income statement:

The income statement is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned, and expenses incurred by the company over a specific period of time. An income statement is also known as an operation statement, an earning statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses.

To Prepare: The comparative condensed income statements for 2015 under FIFO and LIFO.

(b)(1)

To determine

To Explain: the reason for the method of inventory cost flow, which produces the more meaningful inventory amount for the balance sheet.

(2)

To determine

To Explain: the reason for the method of inventory cost flow, which produces the more meaningful net income.

(3)

To determine

To Explain: the reason for the method of inventory cost flow which is most likely to approximate the actual physical flow of the goods.

(4)

To determine

To explain: the reason for the excess of cash available under LIFO than under FIFO.

(5)

To determine

The amount of gross profit which is illusory in FIFO in comparison with the gross profit under LIFO.

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Consolidation after Several Years On January 1, 2016, Adams Corporation acquired all of the stock of Baker Company. The fair value of Adams’ shares used in the exchange was $37,500,000. At the time of acquisition, the book value of Baker’s shareholders’ equity was $5,000,000, and the book value of Baker’s building (25-year life) exceeded its fair value by $1,000,000. From the date of acquisition to December 31, 2021, Baker had cumulative net income of $1,300,000. For 2022, Baker reported net income of $300,000. Adams uses the complete equity method to account for its investment in Baker. There is no goodwill impairment loss for the period 2016 through 2021, but there is impairment loss of $100,000 in 2022. Baker declared no dividends during the period 2016–2022. Required Prepare the working paper eliminating entries necessary to consolidate the financial statements of Adams and Baker at December 31, 2022. Enter numerical answers using all zeros (do not abbreviate in thousands or in…

Answer 2

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Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 6, Problem 6.7BP

(a)

To determine

First-in-First-Out:

In First-in-First-Out method, the costs of the initially purchased items are considered as cost of goods sold, for the items which are sold first. The value of the ending inventory consists of the recent purchased items.

Last-in-Last-Out:

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

The Income statement:

The income statement is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned, and expenses incurred by the company over a specific period of time. An income statement is also known as an operation statement, an earning statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses.

To Prepare: The comparative condensed income statements for 2015 under FIFO and LIFO.

(b)(1)

To determine

To Explain: the reason for the method of inventory cost flow, which produces the more meaningful inventory amount for the balance sheet.

(2)

To determine

To Explain: the reason for the method of inventory cost flow, which produces the more meaningful net income.

(3)

To determine

To Explain: the reason for the method of inventory cost flow which is most likely to approximate the actual physical flow of the goods.

(4)

To determine

To explain: the reason for the excess of cash available under LIFO than under FIFO.

(5)

To determine

The amount of gross profit which is illusory in FIFO in comparison with the gross profit under LIFO.

Expert Solution & Answer

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Answer 3

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 6, Problem 6.7BP

(a)

To determine

First-in-First-Out:

In First-in-First-Out method, the costs of the initially purchased items are considered as cost of goods sold, for the items which are sold first. The value of the ending inventory consists of the recent purchased items.

Last-in-Last-Out:

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

The Income statement:

The income statement is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned, and expenses incurred by the company over a specific period of time. An income statement is also known as an operation statement, an earning statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses.

To Prepare: The comparative condensed income statements for 2015 under FIFO and LIFO.

(b)(1)

To determine

To Explain: the reason for the method of inventory cost flow, which produces the more meaningful inventory amount for the balance sheet.

(2)

To determine

To Explain: the reason for the method of inventory cost flow, which produces the more meaningful net income.

(3)

To determine

To Explain: the reason for the method of inventory cost flow which is most likely to approximate the actual physical flow of the goods.

(4)

To determine

To explain: the reason for the excess of cash available under LIFO than under FIFO.

(5)

To determine

The amount of gross profit which is illusory in FIFO in comparison with the gross profit under LIFO.

Expert Solution & Answer

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Answer 4

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 6, Problem 6.7BP

(a)

To determine

First-in-First-Out:

In First-in-First-Out method, the costs of the initially purchased items are considered as cost of goods sold, for the items which are sold first. The value of the ending inventory consists of the recent purchased items.

Last-in-Last-Out:

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

The Income statement:

The income statement is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned, and expenses incurred by the company over a specific period of time. An income statement is also known as an operation statement, an earning statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses.

To Prepare: The comparative condensed income statements for 2015 under FIFO and LIFO.

(b)(1)

To determine

To Explain: the reason for the method of inventory cost flow, which produces the more meaningful inventory amount for the balance sheet.

(2)

To determine

To Explain: the reason for the method of inventory cost flow, which produces the more meaningful net income.

(3)

To determine

To Explain: the reason for the method of inventory cost flow which is most likely to approximate the actual physical flow of the goods.

(4)

To determine

To explain: the reason for the excess of cash available under LIFO than under FIFO.

(5)

To determine

The amount of gross profit which is illusory in FIFO in comparison with the gross profit under LIFO.

Expert Solution & Answer

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Answer 5

Chapter 6, Problem 6.7BP

(a)

To determine

First-in-First-Out:

In First-in-First-Out method, the costs of the initially purchased items are considered as cost of goods sold, for the items which are sold first. The value of the ending inventory consists of the recent purchased items.

Last-in-Last-Out:

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

The Income statement:

The income statement is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned, and expenses incurred by the company over a specific period of time. An income statement is also known as an operation statement, an earning statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses.

To Prepare: The comparative condensed income statements for 2015 under FIFO and LIFO.

(b)(1)

To determine

To Explain: the reason for the method of inventory cost flow, which produces the more meaningful inventory amount for the balance sheet.

(2)

To determine

To Explain: the reason for the method of inventory cost flow, which produces the more meaningful net income.

(3)

To determine

To Explain: the reason for the method of inventory cost flow which is most likely to approximate the actual physical flow of the goods.

(4)

To determine

To explain: the reason for the excess of cash available under LIFO than under FIFO.

(5)

To determine

The amount of gross profit which is illusory in FIFO in comparison with the gross profit under LIFO.

Answer 6

Chapter 6, Problem 6.7BP

(a)

To determine

First-in-First-Out:

In First-in-First-Out method, the costs of the initially purchased items are considered as cost of goods sold, for the items which are sold first. The value of the ending inventory consists of the recent purchased items.

Last-in-Last-Out:

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

The Income statement:

The income statement is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned, and expenses incurred by the company over a specific period of time. An income statement is also known as an operation statement, an earning statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses.

To Prepare: The comparative condensed income statements for 2015 under FIFO and LIFO.

Answer 7

Chapter 6, Problem 6.7BP

(a)

To determine

First-in-First-Out:

In First-in-First-Out method, the costs of the initially purchased items are considered as cost of goods sold, for the items which are sold first. The value of the ending inventory consists of the recent purchased items.

Last-in-Last-Out:

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

The Income statement:

The income statement is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned, and expenses incurred by the company over a specific period of time. An income statement is also known as an operation statement, an earning statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses.

To Prepare: The comparative condensed income statements for 2015 under FIFO and LIFO.

Answer 8

(b)(1)

To determine

To Explain: the reason for the method of inventory cost flow, which produces the more meaningful inventory amount for the balance sheet.

Answer 9

(b)(1)

To determine

To Explain: the reason for the method of inventory cost flow, which produces the more meaningful inventory amount for the balance sheet.

Answer 10

(2)

To determine

To Explain: the reason for the method of inventory cost flow, which produces the more meaningful net income.

Answer 11

(2)

To determine

To Explain: the reason for the method of inventory cost flow, which produces the more meaningful net income.

Answer 12

(3)

To determine

To Explain: the reason for the method of inventory cost flow which is most likely to approximate the actual physical flow of the goods.

Answer 13

(3)

To determine

To Explain: the reason for the method of inventory cost flow which is most likely to approximate the actual physical flow of the goods.

Answer 14

(4)

To determine

To explain: the reason for the excess of cash available under LIFO than under FIFO.

Answer 15

(4)

To determine

To explain: the reason for the excess of cash available under LIFO than under FIFO.

Answer 16

(5)

To determine

The amount of gross profit which is illusory in FIFO in comparison with the gross profit under LIFO.

Answer 17

(5)

To determine

The amount of gross profit which is illusory in FIFO in comparison with the gross profit under LIFO.

Answer 18

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Answer 19

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Answer 20

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Answer 21

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To Explain: the reason for the method of inventory cost flow, which produces the more meaningful inventory amount for the balance sheet.

To Explain: the reason for the method of inventory cost flow, which produces the more meaningful net income.

To Explain: the reason for the method of inventory cost flow which is most likely to approximate the actual physical flow of the goods.

To explain: the reason for the excess of cash available under LIFO than under FIFO.

The amount of gross profit which is illusory in FIFO in comparison with the gross profit under LIFO.

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