Cornerstones of Financial Accounting
4th Edition
ISBN: 9781337690881
Author: Jay Rich, Jeff Jones
Publisher: Cengage Learning
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Chapter 6, Problem 78.2C
To determine
Introduction:
Ending inventory is the most effect item at the time of calculate the cost of goods sold.
Ending inventory is the measure of inventory an organization has available toward the finish of its financial year. It is firmly related with ending inventory cost, which is the measure of cash spent to get these products in stock. It ought to be determined at the lower of expense or market.
To choose:
Why would a manager intent on misstating profits choose ending inventory to achieve the desired effect?
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Students have asked these similar questions
A serious exposure in the ordering process of the expenditure cycle is increased inventory costs. What is the related threat and applicable control procedure that address this exposure?
A. mistakes in counting; do not inform receiving employees about quantity ordered
B. paying for items not received; requiring that all supplier invoices be matched to supporting documents
C. purchasing at inflated prices; review of purchase orders
D. theft of inventory; periodic physical counts of inventory and reconciliation to recorded quantities
E. mistakes in posting to accounts payable; reconciliation of detailed accounts payable to the general ledger control account
Some accountants argue that the receiving department should be eliminated from inventory ordering method. what are the objectives of eliminating the receiving function. What accounting/audit problems need to be resolved?
Ethics within inventory estimates and other creative accounting methods. Channel stuffing, swaps, round tripping, and off-balance sheet transactions are concepts used to inflate revenues. What are these tactics, how can they prevented, or should they be prevented in accounting practices?
Chapter 6 Solutions
Cornerstones of Financial Accounting
Ch. 6 - Prob. 1DQCh. 6 - Describe the types of inventories used by...Ch. 6 - Compare the flow of inventory costs between...Ch. 6 - What are the components of cost of goods available...Ch. 6 - How is cost of goods sold determined?Ch. 6 - How do the perpetual and periodic inventory...Ch. 6 - Why are perpetual inventory systems more expensive...Ch. 6 - Prob. 8DQCh. 6 - Prob. 9DQCh. 6 - Prob. 10DQ
Ch. 6 - Prob. 11DQCh. 6 - Why do the four inventory costing methods produce...Ch. 6 - The costs of which units of inventory (oldest or...Ch. 6 - If inventory prices are rising, which inventory...Ch. 6 - How would reported income differ if LIFO rather...Ch. 6 - Prob. 16DQCh. 6 - Why are inventories written down to the lower of...Ch. 6 - What is the effect on the current period income...Ch. 6 - What do the gross profit and inventory turnover...Ch. 6 - Prob. 20DQCh. 6 - How does an error in the determination of ending...Ch. 6 - ( Appendix 6A) What accounts are used to record...Ch. 6 - ( Appendix 6B) For each inventory costing method,...Ch. 6 - If beginning inventory is $20,000, purchases are...Ch. 6 - Which of the following transactions would not...Ch. 6 - Briggs Company purchased $15,000 of inventory on...Ch. 6 - Prob. 4MCQCh. 6 - U-Save Automotive Group purchased 10 vehicles...Ch. 6 - Refer to the information for Morgan Inc. above. If...Ch. 6 - Prob. 7MCQCh. 6 - Refer to the information for Morgan Inc. above. If...Ch. 6 - When purchase prices are rising, which of the...Ch. 6 - Prob. 10MCQCh. 6 - Which of the following statements regarding the...Ch. 6 - Which of the following statements is true with...Ch. 6 - An increasing inventory turnover ratio indicates...Ch. 6 - Ignoring taxes, if a company understates its...Ch. 6 - Prob. 15MCQCh. 6 - ( Appendix 6B) Refer to the information for Morgan...Ch. 6 - ( Appendix 6B) Refer to the information for Morgan...Ch. 6 - Prob. 18MCQCh. 6 - Prob. 19CECh. 6 - Use the following information for Cornerstone...Ch. 6 - Use the following information for Cornerstone...Ch. 6 - Inventory Costing: FIFO Refer to the information...Ch. 6 - Inventory Costing: LIFO Refer to the information...Ch. 6 - Inventory Costing: Average Cost Refer to the...Ch. 6 - Effects of Inventory Costing Methods Refer to your...Ch. 6 - Lower of Cost or Market The accountant for Murphy...Ch. 6 - Inventory Analysis Singleton Inc. reported the...Ch. 6 - Inventory Errors McLelland Inc. reported net...Ch. 6 - Prob. 29CECh. 6 - ( Appendix 6B) Inventory Costing Methods: Periodic...Ch. 6 - ( Appendix 6B) Inventory Costing Methods: Periodic...Ch. 6 - ( Appendix 6B) Inventory Costing Methods: Periodic...Ch. 6 - Prob. 33BECh. 6 - Prob. 34BECh. 6 - Inventory Costing Methods Refer to the information...Ch. 6 - Effects of Inventory Costing Methods Refer to the...Ch. 6 - Lower of Cost or Market Garcia Company uses FIFO,...Ch. 6 - Inventory Analysis Callahan Company reported the...Ch. 6 - Prob. 39BECh. 6 - ( Appendix 6A) Recording Purchase and Sales...Ch. 6 - ( Appendix 6B) Inventory Costing Methods: Periodic...Ch. 6 - Prob. 42ECh. 6 - Prob. 43ECh. 6 - Perpetual and Periodic Inventory Systems Below is...Ch. 6 - Recording Purchases Compass Inc. purchased 1,250...Ch. 6 - Recording Purchases Dawson Enterprises uses the...Ch. 6 - Recording Purchases and Shipping Terms On May 12,...Ch. 6 - Prob. 48ECh. 6 - Recording Purchases and Sales Printer Supply...Ch. 6 - Inventory Costing Methods Crandall Distributors...Ch. 6 - Inventory Costing Methods On June 1, Welding...Ch. 6 - Financial Statement Effects of FIFO and LIFO The...Ch. 6 - Effects of Inventory Costing Methods Jefferson...Ch. 6 - Inventory Costing Methods Neyman Inc. has the...Ch. 6 - Effects of FIFO and LIFO Sheepskin Company sells...Ch. 6 - Lower of Cost or Market Merediths Appliance Store...Ch. 6 - Lower of Cost or Market Shaw Systems sells a...Ch. 6 - Analyzing Inventory The recent financial...Ch. 6 - Effects of an Error in Ending Inventory Waymire...Ch. 6 - Prob. 60ECh. 6 - ( Appendices 6A and 6B) Recording Purchases and...Ch. 6 - Prob. 62ECh. 6 - ( Appendix 6B) Inventory Costing Methods: Periodic...Ch. 6 - ( Appendix 6B) Inventory Costing Methods: Periodic...Ch. 6 - Applying the Cost of Goods Sold Model The...Ch. 6 - Recording Sale and Purchase Transactions Alpharack...Ch. 6 - Inventory Costing Methods Andersons Department...Ch. 6 - Inventory Costing Methods Gavin Products uses a...Ch. 6 - Lower of Cost or Market Sue Stone, the president...Ch. 6 - Inventory Costing and LCM Ortman Enterprises sells...Ch. 6 - Effects of an Inventory Error The income...Ch. 6 - ( Appendices 6A and 6B) Inventory Costing Methods...Ch. 6 - ( Appendix 6B) Inventory Costing Methods Jet Black...Ch. 6 - Prob. 65BPSBCh. 6 - Recording Sale and Purchase Transactions Jordan...Ch. 6 - Inventory Costing Methods Ein Company began...Ch. 6 - Inventory Costing Methods Terpsichore Company uses...Ch. 6 - Prob. 69BPSBCh. 6 - Prob. 70BPSBCh. 6 - Prob. 71BPSBCh. 6 - ( Appendices 6A and 6B) Inventory Costing Methods...Ch. 6 - ( Appendix 6B) Inventory Costing Methods Grencia...Ch. 6 - Prob. 74.1CCh. 6 - Prob. 74.2CCh. 6 - Prob. 75.1CCh. 6 - Inventory Costing When Inventory Quantities Are...Ch. 6 - Inventory Purchase Price Volatility In 2019, Steel...Ch. 6 - Prob. 77.1CCh. 6 - Prob. 77.2CCh. 6 - Errors in Ending Inventory From time to time,...Ch. 6 - Prob. 78.2CCh. 6 - Prob. 79.1CCh. 6 - Ethics and Inventory An electronics store has a...Ch. 6 - Ethics and Inventory An electronics store has a...Ch. 6 - Prob. 80.1CCh. 6 - Prob. 80.2CCh. 6 - Prob. 80.3CCh. 6 - Prob. 80.4CCh. 6 - Prob. 80.5CCh. 6 - Prob. 80.6CCh. 6 - Comparative Analysis: Under Armour, Inc., vs....Ch. 6 - Comparative Analysis: Under Armour, Inc., vs....Ch. 6 - Comparative Analysis: Under Armour, Inc., vs....Ch. 6 - Prob. 81.4CCh. 6 - Comparative Analysis: Under Armour, Inc., vs....Ch. 6 - Prob. 82.1CCh. 6 - CONTINUING PROBLEM: FRONT ROW ENTERTAINMENT In...Ch. 6 - Prob. 82.3C
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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
- One reason for inventory is to prevent shutdowns. How does the JIT approach to inventory management deal with this potential problem?arrow_forwardIf inventory errors are said to correct themselves, why are accounting users concerned when such errors are made?arrow_forwardWhich of the following is an example of fraudulent financial reporting? a. The treasurer diverts customer payments to his personal due, concealing his actions by debiting an expense account, thus overstating expenses. O b. An employee steals inventory and the "shrinkage" is recorded in cost of goods sold. O c. Company management changes inventory count tags and overstates ending inventory, while understating cost of goods sold. O d. An employee steals small tools from the company and neglects to return them; the cost is reported as a miscellaneous operating expense.arrow_forward
- Very high inventory turnover ratio relative to industry norms could possibly indicate the company does not carry adequate inventory, so shortages could potentialy hurt reverue. Select one: True Falsearrow_forwardSome inventory errors are said to be “self-correcting,” in that the error has the opposite financial statement effectin the period following the error, thereby “correcting,” the original account balance errors.Required:Despite this self-correcting feature, discuss why these errors should not be ignored and describe the steps requiredto account for the error correction.arrow_forwardWhich statements below are true? 1. LCM and LCNRV may be applied by individual products, by product category or by total inventory. 2. A firm that wants to minimize the negative impact of inventory write-down on net income should apply LCM or LCNRV by individual products. 3. If inventory write-down is usual and not substantial, a firm should debit "Loss on inventory write-down” and credit "Inventory". 4. LCM and LCNRV applied by total inventory will result in higher value of inventory and lower inventory write-down than by individual products, by product category. 5. If inventory write-down is unusual and substantial, a firm should debit "Cost of good sold" and credit "Inventory".arrow_forward
- 24.Which of the following is not a potential consequence of carrying insufficient inventory to meet the day to day needs of the business? A Breaks in production due to lack of raw materials B Cost savings on ordering inventory at short notice C Loss of customer goodwill D Missed opportunity to make salesarrow_forwardSuppose an accountant discovers that the company holds substantial amounts of inventory that are now obsolete and worthless. Should the accountant report the truth, write off the inventory as an asset, and take a loss on obsolete inventory in earnings? Suppose the accountant also knows that the company is already in distress. Should the accountant seek ways to avoid or delay recognizing inventory losses that will cause the company to report lower earnings and thereby experience a drop in stock price and potential bankruptcy? What if the accountant knows the company is growing quickly and generating healthy profits?arrow_forwardExplain inventory overstatement. A merchandising company has asked you to advise it on how to detect fraudulent financial reporting. Management wants your help in detecting inventory overstatement. Further, management wants to know how to find evidence of inventory overstatement. Using your own numbers, make up an example to show management the effect of overstating inventory. Show how inventory overstatement at the end of Year 1 carries through to the beginning inventory overstatement in Year 2. Prepare a brief report to management suggesting ways management could detect inventory overstatement.arrow_forward
- To hold back unrealized profit in ending inventory, cost of goods sold is decreased. True or False?arrow_forwarda) Compare the periodic versus the perpetual system as a control device. b) What sort of organisations are likely to use the periodic inventory system?What kind of organisations will prefer to use perpetual inventory system?c) If management overstated the valuation of inventory, would it affect profit for the year?arrow_forwardts) An auditor recently asked an accounting manager to perform a LCM test on a batch of inventory. Since the manager would prefer to avoid the cost of a LCM test, what GAAP argument could she use to avoid performing the test? O The cost of the test would not outweigh the benefit of the result. O Why don't you perform the test? That's what we are paying you for. O I have no reason to believe future value has dropped below the historical cost. h O The recorded cost accurately represents the costs when the inventory was produced.arrow_forward
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