Exam 8: Valuation of Inventories: a Cost-Basis Approach

Dolan Co. received merchandise on consignment. As of March 31, Dolan had recorded the transaction as a purchase and included the goods in inventory. The effect of this on its financial statements for March 31 would be

Use the following information for questions 35 and 36. During 2014 Carne Corporation transferred inventory to Nolan Corporation and agreed to repurchase the merchandise early in 2015. Nolan then used the inventory as collateral to borrow from Norwalk Bank, remitting the proceeds to Carne. In 2015 when Carne repurchased the inventory, Nolan used the proceeds to repay its bank loan. -This transaction is known as a(n)

Which of the following is an advantage for U.S. companies with international operations to use LIFO for U.S. purposes, as opposed to using FIFO for foreign subsidiaries?

In situations where there is a rapid turnover, an inventory method which produces a balance sheet valuation similar to the first-in, first-out method is

Dole Corp.'s accounts payable at December 31, 2014, totaled $750,000 before any necessary year-end adjustments relating to the following transactions: $\bullet$ On December 27, 2014, Dole wrote and recorded checks to creditors totaling $350,000 causing an overdraft of $100,000 in Dole's bank account at December 31, 2014. The checks were mailed out on January 10, 2015. $\bullet$ On December 28, 2014, Dole purchased and received goods for $150,000, terms 2/10, n/30. Dole records purchases and accounts payable at net amounts. The invoice was recorded and paid January 3, 2015. $\bullet$ Goods shipped f.o.b. destination on December 20, 2014 from a vendor to Dole were received January 2, 2015. The invoice cost was $65,000.At December 31, 2014, what amount should Dole report as total accounts payable?

Comparison of FIFO and LIFO. During periods of rising prices, the use of FIFO (as compared with LIFO) will result in what effect on the financial statements?

Under IFRS, which of the following would be included in the cost of inventories?

What is a LIFO reserve?

Risers Inc. reported total assets of $1,800,000 and net income of $240,000 for the current year. Risers determined that inventory was overstated by $18,000 at the beginning of the year (this was not corrected). What is the corrected amount for total assets and net income for the year?

Walsh Retailers purchased merchandise with a list price of $125,000, subject to trade discounts of 20% and 10%, with no cash discounts allowable. Walsh should record the cost of this merchandise as

Dollar-value LIFO.Gott Company adopted the dollar-value LIFO inventory method on 12/31/13. On this date, its inventory consisted of the following items. Instructions (a) Compute the price index for 2014. Round to 2 decimal places. (b) Calculate the 12/31/14 inventory. Label all numbers. (c) Compute the price index for 2015. Round to 2 decimal places.(d) Calculate the 12/31/15 inventory. Label all numbers.

If a company uses the periodic inventory system, what is the impact on the current ratio of including goods in transit F.o.b. shipping point in purchases, but not ending inventory?

The dollar-value LIFO method measures any increases and decreases in a pool in terms of total dollar value and physical quantity of the goods in the inventory pool.

Which of the following items should be included in a company's inventory at the balance sheet date?

Assuming no beginning inventory, what can be said about the trend of inventory prices if cost of goods sold computed when inventory is valued using the FIFO method exceeds cost of goods sold when inventory is valued using the LIFO method?

Wise Company adopted the dollar-value LIFO method on January 1, 2014, at which time its inventory consisted of 6,000 units of Item A @ $5.00 each and 3,000 units of Item B @ $16.00 each. The inventory at December 31, 2014 consisted of 12,000 units of Item A and 7,000 units of Item B. The most recent actual purchases related to these items were as follows: Using the double-extension method, what is the price index for 2014 that should be computed by Wise Company?

Dollar-value LIFO techniques help protect LIFO layers from erosion.

U.S. GAAP has less detailed rules related to the accounting for inventories, compared to IFRS.

In the context of dollar-value LIFO, what is a LIFO layer?

Use the following information for questions 92 through 94. Hudson, Inc. is a calendar-year corporation. Its financial statements for the years 2015 and 2014 contained errors as follows: -Assume that no correcting entries were made at December 31, 2014, or December 31, 2015 and that no additional errors occurred in 2016. Ignoring income taxes, by how much will working capital at December 31, 2016 be overstated or understated?