Loose Leaf Intermediate Accounting
9th Edition
ISBN: 9781260029901
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 8, Problem 8.8P
Supple mental LIFO disclosures; Caterpillar
• LO8–4, LO8–6
Real World Financials
Caterpillar, Inc., is one of the world’s largest manufacturers of construction, mining, and forestry machinery. The following disclosure note is included in the company’s 2015 financial statements:
D. Inventories ($ in millions)
Inventories are stated at the lower of cost or market. Cost is principally determined using the last-in, first-out (LIFO) method. If the FIFO (first-in, first-out) method had been in use, inventories would have been $2,498 million and $2,430 million higher than reported at December 31, 2015 and 2014, respectively.
Required:
1. The company reported LIFO cost of goods sold of $33,742 million. Calculate the amount that would be reported for cost of goods sold had Caterpillar used the FIFO inventory method for all of its inventory.
2. How does the amount in requirement 1 affect income before taxes?
3. Why might the information contained in the disclosure note be useful to a financial analyst?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
The following errors took place in journalizing and posting transactions:a. The payment of $3,125 from a customer on account was recorded as a debit to Cash and a credit toAccounts Payable.b. Advertising expense of $1,500 paid for the current month was recorded as a debit to MiscellaneousExpense and a credit to Advertising Expense.c. The purchase of supplies of $2,690 on the account was recorded as a debit to Office Equipment anda credit to Supplies.d. The receipt of $3,750 for services rendered was recorded as a debit to Accounts Receivable and acredit to Fees Earned.Required:Prepare journal entries to correct the errors.Each error correction carries equal marks.
Required:a) Journalize the following transactions using the direct write-off method of accounting foruncollectible receivables:Aug. 7. Received $175 from Roosevelt McLair and wrote off the remainder owed of $400 asuncollectible.Nov. 23. Reinstated the account of Roosevelt McLair and received $400 cash in full payment.b) Journalize the following transactions using the allowance method of accounting for uncollectiblereceivables:Feb. 12. Received $750 from Manning Wingard and wrote off the remainder owed of $2,000 asuncollectible.June 30. Reinstated the account of Manning Wingard and received $2,000 cash in full payment.Each journal carries equal marks
If someone tracks, tallys and totals a current liabilities for an accounting period, and then seeks to apply this value in a calculation to assess our liquidity, what’s the difference between the current ratio and the “acid-test” (or “quick”) ratio? Does the difference between these two metrics even matter?
Chapter 8 Solutions
Loose Leaf Intermediate Accounting
Ch. 8 - Describe the three types of inventory of a...Ch. 8 - What is the main difference between a perpetual...Ch. 8 - The Cloud Company employs a perpetual inventory...Ch. 8 - The Bockner Company shipped merchandise to Laetner...Ch. 8 - What is a consignment arrangement? Explain the...Ch. 8 - Prob. 8.6QCh. 8 - The Esquire Company employs a periodic inventory...Ch. 8 - Prob. 8.8QCh. 8 - Its common in the electronics industry for unit...Ch. 8 - Explain why proponents of LIFO argue that it...
Ch. 8 - Prob. 8.11QCh. 8 - Describe the ratios used by financial analysts to...Ch. 8 - Prob. 8.13QCh. 8 - Prob. 8.14QCh. 8 - The Austin Company uses the dollar-value LIFO...Ch. 8 - Identify any differences between U.S. GAAP and...Ch. 8 - Determining ending inventory; periodic system ...Ch. 8 - Prob. 8.2BECh. 8 - Prob. 8.3BECh. 8 - Purchas e discounts; gross method LO83 On...Ch. 8 - Prob. 8.5BECh. 8 - Prob. 8.6BECh. 8 - Inventor y cost flow methods; perpetual system ...Ch. 8 - LIFO method LO84 Esquire Inc. uses the LIFO...Ch. 8 - LIFO method LO84 AAA Hardware uses the LIFO...Ch. 8 - LIFO liquidation LO86 Refer to the situation...Ch. 8 - Prob. 8.11BECh. 8 - Ratio analysis LO87 Selected financial statement...Ch. 8 - Dollar-value LIFO LO88 At the beginning of 2018,...Ch. 8 - Perpetual inventory system; journal entries LO81...Ch. 8 - Prob. 8.2ECh. 8 - Determining cost of goods sold; periodic inventory...Ch. 8 - Perpetual and periodic inventory systems compared ...Ch. 8 - Prob. 8.6ECh. 8 - Goods in transit; consignment LO82 The December...Ch. 8 - Physical quantities and costs included in...Ch. 8 - Prob. 8.9ECh. 8 - Prob. 8.10ECh. 8 - Prob. 8.11ECh. 8 - FASB codification research LO82, LO83 Access the...Ch. 8 - Inventory cost flow methods; periodic system ...Ch. 8 - Inventory cost flow methods; perpetual system ...Ch. 8 - Comparison of FIFO and LIFO; periodic system ...Ch. 8 - Average cost method; periodic and perpetual...Ch. 8 - FIFO, LIFO, and average cost methods LO81, LO84...Ch. 8 - Supplemental LIFO disclosures; LIFO reserve; AEP...Ch. 8 - LIFO liquidation LO81, LO84, LO86 The Reuschel...Ch. 8 - Dollar-value LIFO LO88 On January 1, 2018, the...Ch. 8 - Dollar-value LIFO LO88 Mercury Company has only...Ch. 8 - Dollar-value LIFO LO88 Carswell Electronics...Ch. 8 - Concepts; terminology LO81 through LO85 Listed...Ch. 8 - Various inventory transactions; journal entries ...Ch. 8 - Prob. 8.2PCh. 8 - Prob. 8.4PCh. 8 - Various inventory costing methods LO81, LO84...Ch. 8 - Various inventory costing methods LO81, LO84...Ch. 8 - Supple mental LIFO disclosures; Caterpillar LO84,...Ch. 8 - LIFO liquidation LO84, LO86 Taylor Corporation...Ch. 8 - LIFO liquidation LO84, LO86 Cansela Corporation...Ch. 8 - Prob. 8.11PCh. 8 - Integrating problem; inventories and accounts...Ch. 8 - Dollar-value LIFO LO88 On January 1, 2018, the...Ch. 8 - Dollar-value LIFO LO88 Kingston Company uses the...Ch. 8 - Dollar-value LIFO LO88 On January 1, 2018,...Ch. 8 - Prob. 8.1BYPCh. 8 - Real World Case 82 Physical quantities and costs...Ch. 8 - Judgment Case 83 The specific identification...Ch. 8 - Prob. 8.4BYPCh. 8 - Prob. 8.5BYPCh. 8 - Judgment Case 86 Goods in transit LO82 At the end...Ch. 8 - Ethics Case 87 Profit manipulation LO84 In 2017...Ch. 8 - Real World Case 88 Effects of inventory valuation...Ch. 8 - Real World Case 89 Effects of inventory valuation...Ch. 8 - Communication Case 810 Dollar-value LIFO method ...Ch. 8 - Prob. 8.11BYPCh. 8 - Prob. 8.CCTCCh. 8 - Prob. CCIFRS
Knowledge Booster
Learn more about
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
- Dear tutor. I mistakenly submitted blurr image please comment i will write values. please dont Solve with incorrect values otherwise unhelpful.arrow_forwardno aiWhich of the following errors will not be detected by a trial balance?A. Debiting cash instead of accounts receivableB. Recording revenue twiceC. Failing to record a transactionD. A $100 debit matched with a $100 creditarrow_forwardDon't use chatgpt Which of the following errors will not be detected by a trial balance?A. Debiting cash instead of accounts receivableB. Recording revenue twiceC. Failing to record a transactionD. A $100 debit matched with a $100 creditarrow_forward
- 7. If inventory is overstated at year-end, which of the following is true?A. Net income is understatedB. Expenses are overstatedC. Net income is overstatedD. Assets are understated i need help in this question quiarrow_forwardI need correct answer 7. If inventory is overstated at year-end, which of the following is true?A. Net income is understatedB. Expenses are overstatedC. Net income is overstatedD. Assets are understatedarrow_forwardNo chatgpt 7. If inventory is overstated at year-end, which of the following is true?A. Net income is understatedB. Expenses are overstatedC. Net income is overstatedD. Assets are understatedarrow_forward
- 7. If inventory is overstated at year-end, which of the following is true?A. Net income is understatedB. Expenses are overstatedC. Net income is overstatedD. Assets are understatedneed anarrow_forwardNo ai 7. If inventory is overstated at year-end, which of the following is true?A. Net income is understatedB. Expenses are overstatedC. Net income is overstatedD. Assets are understatedarrow_forward7. If inventory is overstated at year-end, which of the following is true?A. Net income is understatedB. Expenses are overstatedC. Net income is overstatedD. Assets are understatedarrow_forward
- I mistakenly submitted blurr image please comment i will write values. please dont Solve with incorrect values otherwise unhelpful.arrow_forwardDevelopment costs in preparing the mine $ 3,400,000 Mining equipment 159,600 Construction of various structures on site 77,900 After the minerals are removed from the mine, the equipment will be sold for an estimated residual value of $12,000. The structures will be torn down. Geologists estimate that 820,000 tons of ore can be extracted from the mine. After the ore is removed, the land will revert back to the state of New Mexico. The contract with the state requires Hecala to restore the land to its original condition after mining operations are completed in approximately four years. Management has provided the following possible outflows for the restoration costs: Cash Outflow Probability $ 620,000 40% 720,000 30% 820,000 30% Hecala’s credit-adjusted risk-free interest rate is 7%. During 2024, Hecala extracted 122,000 tons of ore from the mine. The company’s fiscal year ends on December 31. Required: Determine the amount at which Hecala will record the mine. Calculate the…arrow_forwardI mistakenly submitted blurr image please comment i will write values. please dont Solve with incorrect values otherwise unhelpful.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning
Pkg Acc Infor Systems MS VISIO CDFinanceISBN:9781133935940Author:Ulric J. GelinasPublisher:CENGAGE L
Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning
Pkg Acc Infor Systems MS VISIO CD
Finance
ISBN:9781133935940
Author:Ulric J. Gelinas
Publisher:CENGAGE L
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
IAS 29 Financial Reporting in Hyperinflationary Economies: Summary 2021; Author: Silvia of CPDbox;https://www.youtube.com/watch?v=55luVuTYLY8;License: Standard Youtube License