Exam 6: Inventories

Accounting for inventories under IFRS is very similar to accounting under GAAP.

Linden Watch Company reported the following income statement data for a 2-year period. Linden uses a periodic inventory system. The inventories at January 1, 2013, and December 31, 2014, are correct. However, the ending inventory at December 31, 2013, was overstated $5,000. Instructions (a) Prepare correct income statement data for the 2 years. (b) What is the cumulative effect of the inventory error on total gross profit for the 2 years?

A company just starting business made the following four inventory purchases in June: A physical count of merchandise inventory on June 30 reveals that there are 100 units on hand. Using the average-cost method, the amount allocated to the ending inventory on June 30 is

Paulson, Inc. has 8 computers which have been part of the inventory for over two years. Each computer cost ₤600 and originally retailed for ₤825. At the statement date, each computer has a net realizable value of ₤350. What value should Paulson, Inc., have for the computers at the end of the year?

Zimmer Company uses the perpetual inventory system and the LIFO method. The following information is available for the month of May: Instructions Prepare a schedule to show cost of goods sold and the value of the ending inventory for the month of May.

Inventory costs are allocated to ______________ and cost of goods ____________.

The Entertainment Center accumulates the following cost and market data (in 000) at December 31. What is the lower-of-cost-or-net realizable value of the inventory?

The selection of an appropriate inventory cost flow assumption for an individual company is made by

India Eastern Corporation's computation of cost of goods sold is: The average days to sell inventory for India East is

Speer's Hardware Store prepared the following analysis of cost of goods sold for the previous three years: Net income for the years 2013, 2014, and 2015 was €70,000, €60,000, and €65,000, respectively. Since net income was consistently declining, Mr. Speer hired a new accountant to investigate the cause(s) for the declines. The accountant determined the following: 1. Purchases of €20,000 were not recorded in 2013. 2. The 2013 December 31 inventory should have been €21,000. 3. The 2014 ending inventory included inventory costing €8,000 that was purchased FOB destination and in transit at year end. 4. The 2015 ending inventory did not include goods costing €4,000 that were shipped on December 29 to Sampson Plumbing Company, FOB shipping point. The goods were still in transit at the end of the year. Instructions Determine the correct net income for each year. (Show all computations.)

Management may choose any inventory costing method it desires as long as the cost flow assumption chosen is consistent with the physical movement of goods in the company.

Boyer Company applied FIFO to its inventory and got the following results for its ending inventory. The cost of purchasing units at year-end was VCRs $71, DVD players $72, and iPods $78. Instructions Determine the amount of ending inventory at lower-of-cost-or-net realizable value.

Never Company developed the following information about its inventories in applying the lower-of-cost-or-net realizable value (LCNRV) basis in valuing inventories: If Never applies the LCNRV basis, the value of the inventory reported on the statement of financial position would be

IFRS requires that the cost flow assumption be consistent with the physical movement of the goods.

Wade Company prepares monthly financial statements and uses the gross profit method to estimate ending inventories. Historically, the company has had a 40% gross profit rate. During June, net sales amounted to $80,000; the beginning inventory on June 1 was $24,000; and the cost of goods purchased during June amounted to $36,000. The estimated cost of Wade Company's inventory on June 30 is

The controller of Scheller Company is applying the lower-of-cost-or-net realizable value basis of valuing its ending inventory. The following information is available: Instructions Compute the value of the ending inventory by applying the lower-of-cost-or-net realizable value basis.

The following information was available for Hoover Company at December 31, 2014: beginning inventory $110,000; ending inventory $70,000; cost of goods sold $880,000; and sales $1,200,000. Hoover's days in inventory in 2014 was

The inventory reported on Lazzard Company's statement of financial position is understated by £1,250,000. The company's reported net income for the period will be

Bordeaux Corp., a French subsidiary of a US company, sells one product and uses a perpetual inventory system. The beginning the inventory consisted of 20 units that cost €2,000 per unit. During the current month, the company purchased: 120 units at €2,100 each. Sales during the month totaled 90 units for €4,350 each. What is the cost of goods sold using the LIFO cost flow assumption?

Finch Company is preparing the annual financial statements dated December 31, 2014. Information about inventory stocked for regular sale follows: Compute the valuation for the December 31, 2014, inventory using the lower-of-cost-or-net realizable value basis.