Chapter 8, Problem 8.3BYP

Judgment Case 8–3

The specific identification inventory method; inventoriable costs

• LO8–3, LO8–4

Happlia Co. imports household appliances. Each model has many variations and each unit has an identification number. Happlia pays all costs for getting the goods from the port to its central warehouse in Des Moines. After repackaging, the goods are consigned to retailers. A retailer makes a sale, simultaneously buys the appliance from Happlia, and pays the balance due within one week.

To alleviate the overstocking of refrigerators at a Minneapolis retailer, some were reshipped to a Kansas City retailer where they were still held in inventory at December 31, 2018. Happlia paid the costs of this reshipment. Happlia uses the specific identification inventory costing method.

Required:

1. 1. In regard to the specific identification inventory costing method:
   1. a. Describe its key elements.
   2. b. Discuss why it is appropriate for Happlia to use this method.
2. 2. a. What general criteria should Happlia use to determine inventory carrying amounts at December 31, 2018?

   b. Give four examples of costs included in these inventory carrying amounts.

3. 3. What costs should be reported in Happlia’s 2018 income statement? Ignore lower of cost or market considerations.