Method of Inventory Inventory refers to the current assets that a company expects to sell during the normal course of business operations, the goods that are under process to be completed for future sale, or currently used for producing goods to be sold in the market. Inventory is valued under three methods: FIFO Under this inventory method, the units that are purchased first, are sold first. Thus, it starts from the selling of the beginning inventory, followed by the units purchased in a chronological order of their purchases took place during a particular period. LIFO Under this inventory method, the units that are purchased last, are sold first. Thus, it starts from the selling of the units recently purchased and ending with the beginning inventory. Average cost method Under this method, the cost of the goods available for sale is divided by the number of units available for sale during a particular period. To Prepare: for Mr. KM, the disclosure note that will be included in the 2018 financial statements.

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Answer 1

Question

Chapter 9, Problem 9.9BYP

1.

To determine

Method of Inventory

Inventory refers to the current assets that a company expects to sell during the normal course of business operations, the goods that are under process to be completed for future sale, or currently used for producing goods to be sold in the market. Inventory is valued under three methods:

FIFO

Under this inventory method, the units that are purchased first, are sold first. Thus, it starts from the selling of the beginning inventory, followed by the units purchased in a chronological order of their purchases took place during a particular period.

LIFO

Under this inventory method, the units that are purchased last, are sold first. Thus, it starts from the selling of the units recently purchased and ending with the beginning inventory.

Average cost method

Under this method, the cost of the goods available for sale is divided by the number of units available for sale during a particular period.

To Prepare: for Mr. KM, the disclosure note that will be included in the 2018 financial statements.

2.

To determine

To Explain: as to why the cumulative effect of the change on prior years’ income is not determinable.

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Answer 2

Question

Chapter 9, Problem 9.9BYP

1.

To determine

Method of Inventory

Inventory refers to the current assets that a company expects to sell during the normal course of business operations, the goods that are under process to be completed for future sale, or currently used for producing goods to be sold in the market. Inventory is valued under three methods:

FIFO

Under this inventory method, the units that are purchased first, are sold first. Thus, it starts from the selling of the beginning inventory, followed by the units purchased in a chronological order of their purchases took place during a particular period.

LIFO

Under this inventory method, the units that are purchased last, are sold first. Thus, it starts from the selling of the units recently purchased and ending with the beginning inventory.

Average cost method

Under this method, the cost of the goods available for sale is divided by the number of units available for sale during a particular period.

To Prepare: for Mr. KM, the disclosure note that will be included in the 2018 financial statements.

2.

To determine

To Explain: as to why the cumulative effect of the change on prior years’ income is not determinable.

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Answer 3

Question

Chapter 9, Problem 9.9BYP

1.

To determine

Method of Inventory

Inventory refers to the current assets that a company expects to sell during the normal course of business operations, the goods that are under process to be completed for future sale, or currently used for producing goods to be sold in the market. Inventory is valued under three methods:

FIFO

Under this inventory method, the units that are purchased first, are sold first. Thus, it starts from the selling of the beginning inventory, followed by the units purchased in a chronological order of their purchases took place during a particular period.

LIFO

Under this inventory method, the units that are purchased last, are sold first. Thus, it starts from the selling of the units recently purchased and ending with the beginning inventory.

Average cost method

Under this method, the cost of the goods available for sale is divided by the number of units available for sale during a particular period.

To Prepare: for Mr. KM, the disclosure note that will be included in the 2018 financial statements.

2.

To determine

To Explain: as to why the cumulative effect of the change on prior years’ income is not determinable.

Expert Solution & Answer

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Answer 4

Question

Chapter 9, Problem 9.9BYP

1.

To determine

Method of Inventory

Inventory refers to the current assets that a company expects to sell during the normal course of business operations, the goods that are under process to be completed for future sale, or currently used for producing goods to be sold in the market. Inventory is valued under three methods:

FIFO

Under this inventory method, the units that are purchased first, are sold first. Thus, it starts from the selling of the beginning inventory, followed by the units purchased in a chronological order of their purchases took place during a particular period.

LIFO

Under this inventory method, the units that are purchased last, are sold first. Thus, it starts from the selling of the units recently purchased and ending with the beginning inventory.

Average cost method

Under this method, the cost of the goods available for sale is divided by the number of units available for sale during a particular period.

To Prepare: for Mr. KM, the disclosure note that will be included in the 2018 financial statements.

2.

To determine

To Explain: as to why the cumulative effect of the change on prior years’ income is not determinable.

Expert Solution & Answer

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Answer 5

Chapter 9, Problem 9.9BYP

1.

To determine

Method of Inventory

Inventory refers to the current assets that a company expects to sell during the normal course of business operations, the goods that are under process to be completed for future sale, or currently used for producing goods to be sold in the market. Inventory is valued under three methods:

FIFO

Under this inventory method, the units that are purchased first, are sold first. Thus, it starts from the selling of the beginning inventory, followed by the units purchased in a chronological order of their purchases took place during a particular period.

LIFO

Under this inventory method, the units that are purchased last, are sold first. Thus, it starts from the selling of the units recently purchased and ending with the beginning inventory.

Average cost method

Under this method, the cost of the goods available for sale is divided by the number of units available for sale during a particular period.

To Prepare: for Mr. KM, the disclosure note that will be included in the 2018 financial statements.

2.

To determine

To Explain: as to why the cumulative effect of the change on prior years’ income is not determinable.

Answer 6

Chapter 9, Problem 9.9BYP

1.

To determine

Method of Inventory

Inventory refers to the current assets that a company expects to sell during the normal course of business operations, the goods that are under process to be completed for future sale, or currently used for producing goods to be sold in the market. Inventory is valued under three methods:

FIFO

Under this inventory method, the units that are purchased first, are sold first. Thus, it starts from the selling of the beginning inventory, followed by the units purchased in a chronological order of their purchases took place during a particular period.

LIFO

Under this inventory method, the units that are purchased last, are sold first. Thus, it starts from the selling of the units recently purchased and ending with the beginning inventory.

Average cost method

Under this method, the cost of the goods available for sale is divided by the number of units available for sale during a particular period.

To Prepare: for Mr. KM, the disclosure note that will be included in the 2018 financial statements.

Answer 7

Chapter 9, Problem 9.9BYP

1.

To determine

Method of Inventory

Inventory refers to the current assets that a company expects to sell during the normal course of business operations, the goods that are under process to be completed for future sale, or currently used for producing goods to be sold in the market. Inventory is valued under three methods:

FIFO

Under this inventory method, the units that are purchased first, are sold first. Thus, it starts from the selling of the beginning inventory, followed by the units purchased in a chronological order of their purchases took place during a particular period.

LIFO

Under this inventory method, the units that are purchased last, are sold first. Thus, it starts from the selling of the units recently purchased and ending with the beginning inventory.

Average cost method

Under this method, the cost of the goods available for sale is divided by the number of units available for sale during a particular period.

To Prepare: for Mr. KM, the disclosure note that will be included in the 2018 financial statements.

Answer 8

2.

To determine

To Explain: as to why the cumulative effect of the change on prior years’ income is not determinable.

Answer 9

2.

To determine

To Explain: as to why the cumulative effect of the change on prior years’ income is not determinable.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 9 - Explain the (a) lower of cost or net realizable...Ch. 9 - What are the various levels of aggregation to...Ch. 9 - Describe the alternative approaches for recording...Ch. 9 - Explain the gross profit method of estimating...Ch. 9 - The Rider Company uses the gross profit method to...Ch. 9 - Explain the retail inventory method of estimating...Ch. 9 - Both the gross profit method and the retail...Ch. 9 - Define each of the following retail terms: initial...Ch. 9 - Explain how to estimate the average cost of...Ch. 9 - Prob. 9.10Q

Solution Summary: The author explains that the company changed its inventory valuation from FIFO to LIFO retail method during 2018. The retrospective effect is not feasible because it is difficult to calculate the cumulative effect of the change of affect account balances.

Concept explainers

To Explain: as to why the cumulative effect of the change on prior years’ income is not determinable.

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Chapter 9 Solutions