FUNDAMENTALS OF FINANCIAL ACCOUNTING
6th Edition
ISBN: 9781260823875
Author: PHILLIPS
Publisher: MCGRAW-HILL CUSTOM PUBLISHING
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Chapter 7, Problem 12COP
To determine
Analyze the financial information to identify three observations that lead to inventory write-down to LCM/NRV.
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erms and phrases relating to concepts discussed in this chapter along with descriptions of those terms and phrases follow. Match each term, 1 through 15, with the best description a through o.
Key Inventory Terms and Phrases
Key Inventory Terms and Phrases
Description of Terms and Phrases
Answerabcdefghijklmno
1. Net realizable value
a. Requires retroactive restatement of financial statements
Answerabcdefghijklmno
2. Lower-of-cost-or-market
b. Method for valuing inventory applying to LIFO and retail methods
Answerabcdefghijklmno
3. Allowance to reduce inventory to net realizable value
c. Cancellation of additional markup
Answerabcdefghijklmno
4. Gross profit method
d. Inventory estimation that is not acceptable under GAAP
Answerabcdefghijklmno
5. Estimated loss on purchase commitment
e. Method that approximates lower-of-cost-or-market
Answerabcdefghijklmno
6. Change in inventory method from average to FIFO
f. Not usually practical to retroactively restate or adjust…
Please answer it if is TRUE or FALSE.
Which of the following, if compared to the other methods for valuing inventory, has a material difference? A. LIFO B:
FIFO C: Weighted Average D: Specific Identification.
Chapter 7 Solutions
FUNDAMENTALS OF FINANCIAL ACCOUNTING
Ch. 7 - What are three goals of inventory management?Ch. 7 - Describe the specific types of inventory reported...Ch. 7 - The chapter discussed four inventory costing...Ch. 7 - Which inventory cost flow method is most similar...Ch. 7 - Where possible, the inventory costing method...Ch. 7 - Contrast the effects of LIFO versus FIFO on ending...Ch. 7 - Contrast the income statement effect of LIFO...Ch. 7 - Several managers in your company are experiencing...Ch. 7 - Explain briefly the application of the LCM rule to...Ch. 7 - Prob. 10Q
Ch. 7 - You work for a made-to-order clothing company,...Ch. 7 - Prob. 12QCh. 7 - (Supplement 7B) Explain why an error in ending...Ch. 7 - Which of the following statements are true...Ch. 7 - The inventory costing method selected by a company...Ch. 7 - Which of the following is not a name for a...Ch. 7 - Which of the following correctly expresses the...Ch. 7 - A New York bridal dress designer that makes...Ch. 7 - If costs are rising, which of the following will...Ch. 7 - Which inventory method provides a better matching...Ch. 7 - Which of the following regarding the lower of cost...Ch. 7 - An increasing inventory turnover ratio a....Ch. 7 - In which of the following situations is an LCM/NRV...Ch. 7 - Matching Inventory Items to Type of Business Match...Ch. 7 - Reporting Goods in Transit Abercrombie Fitch Co....Ch. 7 - Prob. 3MECh. 7 - Reporting Inventory-Related Accounts in the...Ch. 7 - Matching Financial Statement Effects to Inventory...Ch. 7 - Matching Inventory Costing Method Choices to...Ch. 7 - Calculating Cost of Goods Available for Sale,...Ch. 7 - Calculating Cost of Goods Available for Sale,...Ch. 7 - Calculating Cost of Goods Available for Sale,...Ch. 7 - Prob. 10MECh. 7 - Calculating Cost of Goods Available for Sale, Cost...Ch. 7 - Calculating Cost of Goods Available for Sale, Cost...Ch. 7 - Calculating Cost of Goods Available for Sale, Cost...Ch. 7 - Reporting Inventory under Lower of Cost or...Ch. 7 - Preparing the Journal Entry to Record Lower of...Ch. 7 - Determining the Effects of Inventory Management...Ch. 7 - Interpreting LCM Financial Statement Note...Ch. 7 - Calculating the Inventory Turnover Ratio and Days...Ch. 7 - Prob. 19MECh. 7 - Prob. 20MECh. 7 - Prob. 21MECh. 7 - (Supplement 7A) Calculating Cost of Goods Sold and...Ch. 7 - (Supplement 7B) Determining the Financial...Ch. 7 - Prob. 24MECh. 7 - Reporting Goods in Transit and Consignment...Ch. 7 - Determining the Correct Inventory Balance Seemore...Ch. 7 - Determining the Correct Inventory Balance Seemore...Ch. 7 - Calculating Cost of Ending Inventory and Cost of...Ch. 7 - Calculating Cost of Ending Inventory and Cost of...Ch. 7 - Prob. 6ECh. 7 - Analyzing and Interpreting the Financial Statement...Ch. 7 - Evaluating the Effects of Inventory Methods on...Ch. 7 - Choosing LIFO versus FIFO When Costs Are Rising...Ch. 7 - Using FIFO for Multiproduct Inventory Transactions...Ch. 7 - Reporting Inventory at Lower of Cost or Market/Net...Ch. 7 - Reporting Inventory at Lower of Cost or Market/Net...Ch. 7 - Analyzing and Interpreting the Inventory Turnover...Ch. 7 - Analyzing and Interpreting the Effects of the...Ch. 7 - Prob. 15ECh. 7 - Analyzing and Interpreting the Financial Statement...Ch. 7 - Prob. 17ECh. 7 - Analyzing the Effects of Four Alternative...Ch. 7 - Evaluating the Income Statement and Income Tax...Ch. 7 - Calculating and Interpreting the Inventory...Ch. 7 - Prob. 4CPCh. 7 - (Supplement 7B) Analyzing and Interpreting the...Ch. 7 - Analyzing the Effects of Four Alternative...Ch. 7 - Evaluating the Income Statement and Income Tax...Ch. 7 - Prob. 3PACh. 7 - Prob. 4PACh. 7 - (Supplement 7B) Analyzing and Interpreting the...Ch. 7 - Prob. 1PBCh. 7 - Prob. 2PBCh. 7 - Prob. 3PBCh. 7 - Prob. 4PBCh. 7 - (Supplement 7B) Analyzing and Interpreting the...Ch. 7 - Prob. 1COPCh. 7 - (Supplement 7A) Recording Inventory Transactions,...Ch. 7 - (Supplement 7A) Recording Inventory Purchases,...Ch. 7 - (Supplement 7A) Recording Inventory Purchases,...Ch. 7 - Prob. 5COPCh. 7 - Prob. 6COPCh. 7 - Prob. 7COPCh. 7 - Prob. 8COPCh. 7 - Prob. 9COPCh. 7 - Prob. 10COPCh. 7 - Prob. 11COPCh. 7 - Prob. 12COPCh. 7 - Prob. 1SDCCh. 7 - Prob. 2SDCCh. 7 - Critical Thinking: Income Manipulation under the...Ch. 7 - Accounting for Changing Inventory Costs In...
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- Which of the following is accounted for prospectively? Change in reporting entity. Change in the percentage used to determine warranty expense. Correction of an error. Changes from the weighted-average method of inventory costing to FIFO.arrow_forwardExplain briefly the application of the LCM rule to ending inventory. Describe its effect on the balance sheet andincome statement when market is lower than costarrow_forwardWhich inventory costing method produces a more accurate balance sheet – FIFO or LIFO? ______________ Provide brief explanation.arrow_forward
- Based on the data in Exercise 6-15 part (a) and assuming that cost was determined by the FIFO method, show how the inventory would appear on the balance sheet.arrow_forwardShort answer: Define a 'responsibility' in accordance with the Conceptual Framework's explanation, using examples. Explain briefly the accounting term "reporting entity" in accordance with the Conceptual Framework for Financial Reporting. Regarding the recording and subsequent revaluation of inventory, please define "the lower of cost and net realizable value." Briefly explain the “accrual basis assumption" and why financial statements are prepared under this basis.arrow_forwardThe goal of this is to review concepts in inventory cost methods. Directions 1.What are the three primary inventory cost flow assumptions? 2. How is cost of goods sold calculated in each of the inventory cost flow assumptions? 3. How does the specific identification method differ from these three primary inventory cost flow assumptions? explain in good detail responses for each one of the questionsarrow_forward
- For commercial reasons, a weighted average and inventory system from lifo fifo should be considered.arrow_forwardIn the Purchasing Process - Level 0 Diagram, a data flow called "inventory's purchase requisition" most likely would be sent by the inventory management process to which of the following processes? Group of answer choices a. order goods and services b. receive goods and services c. determine requirements d. none of the above.arrow_forwardSpringer Anderson Gymnastics prepared its annual financial statements dated December 31. The company reported its inventory using the LIFO inventory costing method but did not compare the cost of its ending inventory to its market value (replacement cost). The preliminary income statement follows: Sales Revenue $ 160,000 Cost of Goods Sold Beginning Inventory $ 20,000 Purchases 101,000 Goods Available for Sale 121,000 Ending Inventory 38,140 Cost of Goods Sold 82,860 77,140 36,000 41,140 8,228 Gross Profit Operating Expenses Income from Operations Income Tax Expense (20%) Net Income $ 32,912 Assume that you have been asked to restate the financial statements to incorporate the LCM/NRV rule. You have developed the following data relating to the ending inventory: Purchase Cost Replacement Cost per Quantity 2,000 Per Unit $ 4.00 Item Total Unit $ 8,000 4,640 13,500 12,000 A $ 5.00 B 800 5.80 2.90 4,500 2,000 C 3.00 1.45 D 6.00 4.00 $ 38,140arrow_forward
- Rank the following inventory methods in terms of their record-keeping cost. For answer choices, the leftmost number has the highest record-keeping cost and the rightmost number has the lowest record-keeping cost. 1. Dollar-value LIFO 2. Retail inventory method - LIFO 3. Unit LIFOarrow_forwardRequired: 1. Complete the applicable inventory record card, and calculate cost of goods sold and the cost of ending inventory under each of the following inventory cost flow assumptions: a. FIFO b. LIFO c. Specific identification d. Weighted average. 2. Prepare the journal entries required to record purchases and sales using the FIFO inventory cost flow assumption. Descriptions are not necessary.…arrow_forward1.Complete the applicable inventory record card, and calculate cost of goods sold and the cost of ending inventory under each of the following inventory cost flow assumptions: a. FIFO b. LIFO c. Specific identification d. Weighted average. 2. Prepare the journal entries required to record purchases and sales using the FIFO inventory cost flow assumption. Descriptions are not necessary. 3. Refer to the "Compare" page. Calculate the sum of cost of goods sold and ending inventory balances under each of the four inventory cost flow assumptions. Explain the results.…arrow_forward
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