GB 112/212 MANAGERIAL ACC. W/ACCESS >C<
17th Edition
ISBN: 9781260218831
Author: Libby
Publisher: MCG CUSTOM
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Chapter 7, Problem 7.12E
Reporting Inventory at Lower of Cost or Market
Jones Company is preparing the annual financial statements dated December 31 of the current year, Ending inventory information about the five major items stocked for regular sale follows:
| ENDING INVENTORY, CURRENT YEAR | |||
| Item | Quantity on Hand | Unit Cost When Acquired (FIFO) | Net Realizable Value (Market) at Year-End |
| A | 50 | $15 | $12 |
| B | 80 | 30 | 40 |
| C | 10 | 48 | 52 |
| D | 70 | 25 | 30 |
| E | 350 | 10 | 5 |
Required:
Compute the valuation that should be used for the current year ending inventory using the LCM rule applied on an item-by-item basis. (Hint: Set up columns for Item, Quantity, Total Cost, Total Market, and LCM Valuation.)
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Mega Company believes the price of oil will increase in the coming months. Therefore, it decides to purchase call options on oil as a price-risk-hedging device to hedge the expected increase in prices on an anticipated purchase of oil.
On November 30, 20X1, Mega purchases call options for 14,000 barrels of oil at $30 per barrel at a premium of $2 per barrel with a March 1, 20X2, call date. The following is the pricing information for the term of the call:
Date
Spot Price
Futures Price (for March 1, 20X2, delivery)
November 30, 20X1
$ 30
$ 31
December 31, 20X1
31
32
March 1, 20X2
33
The information for the change in the fair value of the options follows:
Date
Time Value
Intrinsic Value
Total Value
November 30, 20X1
$ 28,000
$ –0–
$ 28,000
December 31, 20X1
6,000
14,000
20,000
March 1, 20X2
42,000
42,000
On March 1, 20X2, Mega sells the options at their value on that date and acquires 14,000 barrels of oil at the spot price. On June 1, 20X2, Mega sells the…
Chapter 7 Solutions
GB 112/212 MANAGERIAL ACC. W/ACCESS >C<
Ch. 7 - Why is inventory an important item to both...Ch. 7 - Prob. 2QCh. 7 - Prob. 3QCh. 7 - Prob. 4QCh. 7 - Prob. 5QCh. 7 - The chapter discussed tour inventory costing...Ch. 7 - Prob. 7QCh. 7 - Contrast the effects of LIFO versus FIFO on...Ch. 7 - Contrast the income statement effect of LIFO...Ch. 7 - Prob. 10Q
Ch. 7 - Explain briefly the application of the LCM concept...Ch. 7 - Prob. 12QCh. 7 - Consider the following information: ending...Ch. 7 - The inventory costing method selected by a company...Ch. 7 - Which of the following is not a component of the...Ch. 7 - Consider the following information: beginning...Ch. 7 - Consider the following information: beginning...Ch. 7 - An increasing inventory turnover ratio a....Ch. 7 - If the ending balance in accounts payable...Ch. 7 - Which of the following regarding the lower of cost...Ch. 7 - Which inventory method provides a better matching...Ch. 7 - Which of the following is false regarding a...Ch. 7 - Prob. 7.1MECh. 7 - Recording the Cost of Purchases for a Merchandiser...Ch. 7 - Identifying the Cost of Inventories for a...Ch. 7 - Inferring Purchases Using the Cost of Goods Sold...Ch. 7 - Prob. 7.5MECh. 7 - Matching Inventory Costing Method Choices to...Ch. 7 - Reporting Inventory under Lower of Cost or Market...Ch. 7 - Determining the Effects of Inventory Management...Ch. 7 - Prob. 7.9MECh. 7 - Prob. 7.1ECh. 7 - Inferring Missing Amounts Based on Income...Ch. 7 - Prob. 7.3ECh. 7 - Inferring Merchandise Purchases Abercrombie and...Ch. 7 - Calculating Ending Inventory and Cost of Goods...Ch. 7 - Calculating Ending Inventory and Cost of Goods...Ch. 7 - Analyzing and Interpreting the Financial Statement...Ch. 7 - Analyzing and Interpreting the Financial Statement...Ch. 7 - Evaluating the Choice among Three Alternative...Ch. 7 - Evaluating the Choice among Three Alternative...Ch. 7 - Prob. 7.11ECh. 7 - Reporting Inventory at Lower of Cost or Market...Ch. 7 - Prob. 7.13ECh. 7 - Prob. 7.14ECh. 7 - Prob. 7.15ECh. 7 - Prob. 7.16ECh. 7 - Prob. 7.17ECh. 7 - Prob. 7.18ECh. 7 - Prob. 7.19ECh. 7 - Prob. 7.20ECh. 7 - (Chapter Supplement A) Analyzing the Effects of a...Ch. 7 - (Chapter Supplement B) FIFO and LIFO Cost of Goods...Ch. 7 - (Chapter Supplement C) Recording Sales and...Ch. 7 - Analyzing Items to Be Included in Inventory Travis...Ch. 7 - Prob. 7.2PCh. 7 - Evaluating Four Alternative Inventory Methods...Ch. 7 - Prob. 7.4PCh. 7 - Evaluating the LIFO and FIFO Choice When Costs Are...Ch. 7 - Evaluating the Income Statement and Cash Flow...Ch. 7 - Evaluating the Effects of Manufacturing Changes on...Ch. 7 - Evaluating the Choice between LIFO and FIFO Based...Ch. 7 - Prob. 7.9PCh. 7 - (Chapter Supplement A) Analyzing LIFO and FIFO...Ch. 7 - Prob. 7.1APCh. 7 - Evaluating Four Alternative Inventory Methods...Ch. 7 - Evaluating the UFO and FIFO Choice When Costs Are...Ch. 7 - Prob. 7.4APCh. 7 - Prob. 7.1CONCh. 7 - Finding Financial Information Refer to the...Ch. 7 - Finding Financial Information Refer to the...Ch. 7 - Comparing Companies within an Industry Refer to...Ch. 7 - Prob. 7.4CPCh. 7 - Using Financial Reports: Interpreting Effects of...Ch. 7 - Making a Decision as a Financial Analyst: Analysis...Ch. 7 - Evaluating an Ethical Dilemma: Earnings, Inventory...
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