Exam 9: Inventories: Additional Valuation Issues

Dub Dairy produces milk to sell to local and national ice cream producers.Dub Dairy began operations on January 1, 2011 by purchasing 840 milk cows for $1,176,000.The company controller had the following information available at year end relating to the cows: At December 31, 2011, what is the value of the milking cows on Dub Dairy's statement of financial position?

At the end of the fiscal year, Apha Airlines has an outstanding non-cancellable purchase commitment for the purchase of 1 million gallons of jet fuel at a price of $4.10 per gallon for delivery during the coming summer.The company prices its inventory at the LCNRV. If the market price for jet fuel at the end of the year is $4.50, how would this situation be reflected in the annual financial statements?

A basket purchase occurs when a company agrees to buy inventory weeks or months in advance.

Most purchase commitments must be recorded as a liability.

The average days to sell inventory represents the average number of days' sales for which a company has inventory on hand.

Robust Inc.has the following information related to an item in its ending inventory.Product 66 has a cost of $6,500, a selling price of $7,100, a cost to complete of $600, and a cost to sell of $400.What is the lower-of-cost-or-net realizable value for product 66?

RS Corporation, a manufacturer of ethnic foods, contracted in 2010 to purchase 500 pounds of a spice mixture at $5.00 per pound, delivery to be made in spring of 2011.By 12\31\10, the price per pound of the spice mixture had risen to $5.60 per pound.In 2010, AJ should recognize

Use the following information for questions. Plank Co.uses the retail inventory method.The following information is available for the current year. -The approximate cost of the ending inventory by the conventional retail method is

The gross profit method can be used to approximate the dollar amount of inventory on hand.

Under U.S.GAAP, if inventory is written down under lower-of-cost-or-market, it may not be written back up to its original cost in a subsequent period.

Under International Financial Reporting Standards (IFRS), net realizable value is the general rule for valuing which of the following types of inventory?

In late 2011, Daisy Company entered into a noncancelable purchase contract for which the contract price is now greater than the market price, and Daisy expects that losses will occur when the purchase is executed in early 2012.Under IFRS, Daisy should recognize a liability and corresponding loss in 2011.

Given the historical cost of product Z is $150, the selling price of product Z is $190, costs to sell product Z are $21, and the cost to complete product Z is $30, what is the net realizable value that should be used in the lower-of-cost-or-net realizable value comparison?

Use the following information for questions. The following data concerning the retail inventory method are taken from the financial records of Welch Company. -If the foregoing figures are verified and a count of the ending inventory reveals that merchandise actually on hand amounts to $54,000 at retail, the business has

When the conventional retail method includes both net markups and net markdowns in the cost-to-retail ratio, it approximates a lower-of-cost-or-net realizable value valuation.

Robust Inc.has the following information related to an item in its ending inventory.Acer Top has a cost of $502, a selling price of $568, a cost to complete of $53, and a cost to sell of $38.What is the lower-of-cost-or-net realizable inventory value for Acer Top?

Lucy's Llamas purchased 1,000 llamas on January 1, 2011.These llamas will be sheared semiannually and their wool sold to specialty clothing manufacturers.The llamas were purchased for $148,000.During 2011 the change in fair value due to growth and price changes is $9,400, the wool harvested but not yet sold is valued at net realizable value of $18,000, and the change in fair value due to harvest is ($1,150).On Lucy's Llamas income statement for the year ending December 31, 2011, what amount of unrealized gain on biological assets will be reported?

International Financial Reporting Standards (IFRS) require that a company record an inventory write-down as part of cost of goods sold.

The retail inventory method is based on the assumption that the

Which statement is true about the retail inventory method?