Soft Bound Version for Advanced Accounting 13th Edition
13th Edition
ISBN: 9781260110579
Author: Hoyle
Publisher: McGraw Hill Education
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Chapter 8, Problem 17Q
To determine
Describe how a company should handle LIFO liquidation in an interim period when the liquidated inventory is expected to be replaced by year-end.
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How should a company handle a LIFO liquidation in an interim period when the liquidated inventory is expected to be replaced by year-end?
Which of the following statements is not true concerning interim financial
reporting and inventories?
A company that uses LIFO and encounters a temporary partial
a)
liquidation of its base period inventory must include the effects of the
liquidation in the period in which it occurred.
b)
Provisions for write-downs to market should generally be the same
for both the annual and interim reporting.
A company that utilizes a periodic inventory system and uses
c)
estimated gross profit rates to determine costs of goods sold during
interim periods should disclose any significant adjustments that result
from reconciliation with the annual physical inventory.
d)
The same inventory pricing method used for annual reporting should
generally be used for interim reporting.
Assume prices were stable during the period. The following values were obtained from the inventory records of Harris Company which has a fiscal year ending on December 31:
Inventory, January 1, 2019, LIFO
$80,000
Inventory, March 31, 2019, LIFO
70,000
Required:
1.
Under what conditions is Harris’s inventory liquidation not reflected in its first-quarter interim financial statements?
2.
Assuming that the liquidation is not to be reflected, what adjusting entry would Harris make?
Chapter 8 Solutions
Soft Bound Version for Advanced Accounting 13th Edition
Ch. 8 - Prob. 1QCh. 8 - Prob. 2QCh. 8 - Prob. 3QCh. 8 - The management approach requires a firm to define...Ch. 8 - What is an operating segment?Ch. 8 - Prob. 6QCh. 8 - Prob. 7QCh. 8 - Prob. 8QCh. 8 - Prob. 9QCh. 8 - Prob. 10Q
Ch. 8 - Prob. 11QCh. 8 - To satisfy geographic area disclosure...Ch. 8 - Prob. 13QCh. 8 - Prob. 14QCh. 8 - Prob. 15QCh. 8 - Prob. 16QCh. 8 - Prob. 17QCh. 8 - How does a company determine the amount of income...Ch. 8 - Prob. 19QCh. 8 - Prob. 20QCh. 8 - What type of segment information must companies...Ch. 8 - How would an annual bonus paid at year-end be...Ch. 8 - Which of the following does U.S. GAAP not consider...Ch. 8 - Prob. 2PCh. 8 - Prob. 3PCh. 8 - Prob. 4PCh. 8 - Prob. 5PCh. 8 - Which of the following is not necessarily true for...Ch. 8 - Prob. 7PCh. 8 - Prob. 8PCh. 8 - Prob. 9PCh. 8 - Which of the following items is required to be...Ch. 8 - Prob. 11PCh. 8 - Prob. 12PCh. 8 - Which of the following information items with...Ch. 8 - Prob. 14PCh. 8 - In considering interim financial reporting, how...Ch. 8 - How should material seasonal variations in revenue...Ch. 8 - Prob. 17PCh. 8 - Prob. 18PCh. 8 - Prob. 19PCh. 8 - Niceville Company pays property taxes of 100,000...Ch. 8 - Prob. 21PCh. 8 - Prob. 22PCh. 8 - Prob. 23PCh. 8 - Prob. 24PCh. 8 - Prob. 25PCh. 8 - Prob. 26PCh. 8 - Prob. 27PCh. 8 - Prob. 28PCh. 8 - Prob. 29PCh. 8 - Prob. 30PCh. 8 - Prob. 31PCh. 8 - Prob. 32PCh. 8 - Prob. 33PCh. 8 - Prob. 34PCh. 8 - Prob. 35PCh. 8 - Prob. 36PCh. 8 - Prob. 37PCh. 8 - Prob. 38PCh. 8 - Noventis Corporation prepared the following...Ch. 8 - Prob. 40PCh. 8 - Prob. 41PCh. 8 - Prob. 5DYSCh. 8 - ACCOUNTING STANDARDS CASE 1SEGMENT REPORTING...Ch. 8 - ACCOUNTING STANDARDS CASE 2INTERIM REPORTING...Ch. 8 - Prob. 8DYSCh. 8 - Prob. 9DYS
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- The management of Knight Company has asked its accountingdepartment to describe the effect upon the company’s financial position and its income statements of accounting for inventories onthe LIFO rather than the FIFO basis during 2020 and 2021. The accounting department is to assume that the change to LIFO wouldhave been effective on January 1, 2020, and that the initial LIFO base would have been the inventory value on December 31, 201Presented below are the company’s financial statements and other data for the years 2020 and 2021 when the FIFO method wasemployed.Financial Position as of12/31/19 12/31/20 12/31/21Cash $ 50,000 $ 75,000 $ 90,000Accounts receivable 160,000 200,000 220,000Inventory 280,000 315,000 336,000Other assets 200,000 220,000 245,000Total assets $690,000 $810,000 $891,000Accounts payable $220,000 $235,000 $250,000Other liabilities 80,000 90,000 120,000Common stock 100,000 100,000 100,000Retained earnings 290,000 385,000 421,000Total liabilities and equity $690,000…arrow_forwardWhen the income effect of a LIFO liquidation is material, the SEC requires that the 10-K report disclose: Multiple Choice the dollar impact of LIFO liquidation on both a pre-tax and after-tax basis. the dollar impact of LIFO liquidation on the year-end inventory balance. this fact following a prescribed disclosure format. the dollar impact of LIFO liquidation on net income.arrow_forwardThe management of Tritt Company has asked its accounting department to describe the effect upon the company's financial position and its income statements of accounting for inventories on the LIFO rather than the FIFO basis during 2020 and 2021. The accounting department is to assume that the change to LIFO would have been effective on January 1, 2020, and that the initial LIFO base would have been the inventory value on December 31, 2019. The following are the company's financial statements and other data for the years 2020 and 2021 when the FIFO method was employed. Financial Position as of 12/31/19 12/31/20 12/31/21 Cash $ 90,000 $130,000 $154,000 Accounts receivable 80,000 100,000 120,000 Inventory 120,000 140,000 176,000 Other assets 160,000 170,000 200,000 Total assets $450,000 $540,000 $650,000 Accounts payable $ 40,000 $ 60,000 $ 80,000 Other liabilities 70,000 80,000 110,000 Common stock 200,000 200,000 200,000 Retained earnings…arrow_forward
- What happens when a company learns of the bankruptcy of a customer that occurs after the year end what does the company have to doarrow_forwardWhich of the following financial statements would be impacted by a current-year ending inventory error, when using a periodic inventory updating system? A. balance sheet B. income statement C. neither statement D. both statementsarrow_forwardIf consignment inventory is unsold at the end of the period, who reports the ending inventory on the balance sheet?arrow_forward
- The creditors of Chester Company agree to accept promissorynotes for the amount of its indebtedness with a provisothat two-thirds of the annual profits must be appliedto their liquidation. How should these notes be reportedon the balance sheet of the issuing company? Give a reasonfor your answer.arrow_forward1. What is the adjusted net income for 2021?arrow_forwardWhat amount of loss or reversal of loss on write-down should be recognized for 2019? What amount of cost of goods sold should be reported for 2019?arrow_forward
- In order to generate interim financial reports that contain a reasonable portion of annual expenses, which of the following statements is true? a. an allocation of a portion of an annual bonus would be made as an interim adjustment b. any adjustments for inventory shrinkage would be deferred to year end c. the allowance for uncollectible accounts receivable will be revised at year end d. None of the above are truearrow_forward1. What amount should be reported as the pretax cumulative effect of this accounting change? During 2021, Revel Company decided to change from the FIFO method of inventory valuation to weighted average method. a. 400,000 b. 300,000 c. 600,000 d. 500,000 January 1 inventory December 31 inventory FIFO 7,200,000 7,900,000 2. What total amount should be reported as prior period error in the financial statements for the year ended December 31, 2020? a. 1,400,000 b. 600,000 WEIGHTED AVERAGE 7,700,000 8,300,000 ABC Company reported the ff events during 2020: • It was decided to write off 800,000 from inventory which was over two years old as it was obsolete. c.800,000 d. 200,000 • Sales of 600,000 had been omitted from the financial statements for the year ended December 31,2019arrow_forwardNoren Company uses the balance sheet aging method to account for uncollectible debt on receivables. The following is the past-due category information for outstanding receivable debt for 2019. To manage earnings more favorably, Noren Company considers changing the past-due categories as follows. A. Complete each table by filling in the blanks. B. Determine the difference between totals uncollectible. C. Complete the following 2019 comparative income statements for 2019, showing net income changes as a result of the changes to the balance sheet aging method categories. D. Describe the categories change effect on net income and accounts receivable.arrow_forward
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