Exam 9: Inventories: Additional Valuation Issues

Confectioners, a chain of candy stores, purchases its candy in bulk from its suppliers.For a recent shipment, the company paid $3,000 and received 8,500 pieces of candy that are allocated among three groups.Group 1 consists of 2,500 pieces that are expected to sell for $0.25 each.Group 2 consists of 5,500 pieces that are expected to sell for 0.60 each.Group 3 consists of 500 pieces that are expected to sell for $1.20 each.Using the relative sales value method, what is the cost per item in group 3?

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 ending inventory is to be valued at approximately the lower of cost or market, the calculation of the cost to retail ratio should be based on goods available for sale at (1) cost and (2) retail, respectively of

Replenish, Inc.develops and produces sports drinks for sale throughout the United States and Europe.The International Accounting Standards Board (IASB) prohibits Replenish, Inc.from using which of the following cost flow assumptions for its inventory?

Rios, Inc.uses International Financial Reporting Standards (IFRS).In 2010, Rios, Inc.experienced a decline in the value of its inventory resulting in a write-down of its inventory from $240,000 to $200,000.The company used the loss method in 2010 to record the necessary adjustment and uses an allowance account to reduce inventory to NRV.In 2011, market conditions have improved dramatically and Rios, Inc.'s inventory increases to an NRV of $216,000.Which of the following will Rios, Inc.record in 2011?

Ryan Distribution Co.has determined its December 31, 2010 inventory on a FIFO basis at $250,000.Information pertaining to that inventory follows: Ryan records losses that result from applying the lower-of-cost-or-net realizable value rule.At December 31, 2010, the loss that Ryan should recognize is

Kesler, Inc.estimates the cost of its physical inventory at March 31 for use in an interim financial statement.The rate of markup on cost is 25%.The following account balances are available: The estimate of the cost of inventory at March 31 would be

During the prior fiscal year, Jeremiah Corp.signed a long-term noncancellable purchase commitment with its primary supplier to purchase $2.5 million of raw materials.Jeremiah paid the $2.5 million to acquire the raw materials when the raw materials were only worth $2.2 million.Assume that the purchase commitment was properly recorded.What is the journal entry to record the purchase?

During the current fiscal year, Jeremiah Corp.signed a long-term noncancellable purchase commitment with its primary supplier.Jeremiah agreed to purchase $2.5 million of raw materials during the next fiscal year under this contract.At the end of the current fiscal year, the raw material to be purchased under this contract had a market value of $2.3 million.What is the journal entry at the end of the current fiscal year?

Shake Company's inventory experienced a decline in value necessitating a write-down to lower of cost or net realizable value (LCNRV) of $230,000.This amount is material to Shake's income statement and the company follows IFRS.Where should Shake Company report this decline in value according to IFRS? I.As a loss on the income statement. II.As a separate component of other comprehensive income on the statement of comprehensive income. III.As part of cost of goods sold on the income statement.

If the contract price on a noncancelable purchase commitment exceeds the market price, the buyer should recognize a liability and corresponding loss in the period in which the market decline takes place.

Under International Financial Reporting Standards (IFRS), a company who recorded a loss on a purchase commitment in 2011 cannot record a recovery of that loss in 2012 if price improve.

Confectioners, a chain of candy stores, purchases its candy in bulk from its suppliers.For a recent shipment, the company paid $3,000 and received 8,500 pieces of candy that are allocated among three groups.Group 1 consists of 2,500 pieces that are expected to sell for $0.25 each.Group 2 consists of 5,500 pieces that are expected to sell for 0.60 each.Group 3 consists of 500 pieces that are expected to sell for $1.20 each.Using the relative sales value method, what is the cost per item in group 2?

Why are inventories stated at lower-of-cost-or-net realizable value?

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: On Dub Dairy's income statement for the year ending December 31, 2011, what amount of unrealized gain on biological assets will be reported?

Under International Financial Reporting Standards (IFRS), net realizable value is the general rule for valuing commodities held by broker-traders.

Lenny's Llamas purchased 1,500 llamas on January 1, 2011.These llamas will be sheared semiannually and their wool sold to specialty clothing manufacturers.The llamas were purchased for $222,000.During 2011 the change in fair value due to growth and price changes is $14,100, the wool harvested but not yet sold is valued at net realizable value of $27,000, and the change in fair value due to harvest is ($1,750).What is the value of the llamas on Lenny's Llamas statement of financial position on June 30, 2011?

Use the following information for questions. Plank Co.uses the retail inventory method.The following information is available for the current year. -The ending inventory at retail should be

In the retail inventory method, the term markup means a markup on the original cost of an inventory item.

The 2010 financial statements of Sito Company reported a beginning inventory of $80,000, an ending inventory of $120,000, and cost of goods sold of $600,000 for the year.Sito's inventory turnover ratio for 2010 is

A company should abandon the historical cost principle when the future utility of the inventory item falls below its original cost.