Case Analysis Of Crispy Bacon, Inc. ( Cb )

When calculating the percentage change in inventories, an issue arises when using either the lower cost of market or the market value. When looking at the calculations for finished goods inventory (insulated wire) and copper rod inventory Laramie has applied the lower cost of market. However, the calculation pertaining to plastics inventory reveals that the market value should be used for classification, but Laramie has used cost. The percentage change of the plastics inventory if the $.12 per pound is used is a 27% decrease. The importance of classifying inventory correctly

Differences in the asset impairment testing model may result in assets being impaired earlier under IFRS and Mexican FRS. However, there are certain differences on the impairment testing under the three frameworks. The broad based requirement to capitalize development costs under IFRS and Mexican FRS (when certain criteria are met) creates the potential for differences compared with US GAAP, wherein development costs are generally expensed as incurred. IFRS prohibits (whereas US GAAP and Mexican FRS permit) the use of the lastin, first-out inventory-costing methodology. In addition, Mexican FRS accepts the inventory costing

During periods of sharp price movements, LIFO has a stabilizing effect upon reported income figures because it eliminates paper income and losses on inventory and smooths the impact of income taxes. LIFO opponents object to the method principally because the inventory valuation reported in the balance sheet could be seriously misleading. The profit figures can be artificially influenced by management through contracting or expanding inventory quantities. Temporary involuntary depletion of LIFO inventories would distort current income by the previously unrecog-nized price gains or losses applicable to the inventory reduction.

For analysis sake, the transition from LIFO to FIFO method helps one to evaluate the up-to-date costs of inventories and debt paying capabilities as well as portraying their uninflated inventory turnover values (Subramanyam, 2014). Additionally, since inventories often represent significant percentages of a company’s assets and inflation leads to price increases overtime, LIFO to FIFO restatements can allow analysts to compare companies with different inventory valuation methods (Investopedia, 2016c). More specifically, investors can assess each method’s short and long-term effects on values such as tax expense and net income (affecting earnings

The fair value measurement of inventory is difficult to measure since it is based on the price that would be received to sell the inventory. This method creates the need for a hypothetical value to be assigned until the actual sell of the inventory occurs. (Robin

・Incorrect items were received and returned in full (risk - excess inventory and A/P. are recorded)

As inventory differences are related to individual material records, a location error and a quantity error in the same stock record will be counted as only one error in computing the inventory accuracy rate. Changes in cognizance symbols, stock numbers, units of issue, unit prices, management codes, etc., determined to be required as the result of physical inventory, are not to be considered as errors in computing the inventory accuracy rate.

Firstly, specific identification method is a method of recording inventory costs for small number of expensive identifiable or easily distinguished items like cars or automobiles, furniture, handcraft, fine watches, and jewelry. Using this method, you can calculate the cost of goods sold and cost of ending inventory at the end of the accounting period. What to do first is to do a physical count of the remaining specific identifiable items which can easily be separated. Then the cost of each remaining item is tracked (that is unit cost) and multiplied by the number of it available in the inventory. The same is done for the other items and then the total cost of the items is calculated. This will give the cost of the ending or remaining inventory. The cost of goods sold is calculated by subtracting ending inventory from purchases.

The use of LIFO as an inventory management system is recognized as one of three management systems and has been accepted by GAAP. However, IFRS does not recognized LIFO as an acceptable management system. Many advocates of LIFO argue that it provides an accurate revenue match with expenses since sales reveal the most recent selling prices, then the cost of goods sold should also reflect the most recent inventory purchasing costs. However, the ending inventory balances shown on the

Under FASB Codification, ASC 330-10-30 is the primary source of guidance on initial measurement of inventories. The initial measurement basis of accounting for inventories is cost, which generally includes applicable expenditures and charges directly or indirectly incurred in bringing an article to its existing condition and location. The cost for inventory is determined by using one of the following cost flow assumptions, such as first-in first-out (FIFO), average, and last-in first-out (LIFO). Sometimes, the retail inventory method is more practical and appropriate than the other three methods and thus is allowed in some situations. The business operations in some cases may be such as to make it desirable to apply one of the acceptable methods of determining cost to one portion of the inventory or components thereof and another of the acceptable methods to other portions of the inventory.

Inventory is typically recorded using the cost basis, however, in certain circumstances when the utility of the goods is no longer as great as their cost a departure from the cost basis is required. When a loss of utility occurs, it is charged against the revenues for the period it occurred. Losses are measured by

Price based on latest purchase invoice price will make the value of the inventory not accurate enough. The value of items tested might be not accurate, this will affect the result when set the range of percentage applied to base. For example, when the $2000 total error is materiality is due to the set up limit is at $25000, and this $25000 set up based on the value of items tested. If the sample value is actually inaccurate lower than expected, then this will affect the limitation setting and make it lower. At this point, the error might be materiality when the limit down to $2000. As we don’t know the nature of the inventory, therefore it’s hard to say whether the calculation of the value it acceptable or not, such as if the inventory is food or something that could be change by time, then it might worth nothing after the latest sales. The determination still based on the nature of the inventory. Also, in this case, the nature of error has not been described, which when auditor consider whether an error is material or not should not only base on the amount.

FIFO OR WAC method is used in determining the cost of inventory. the use of LIFO method is prohibited

Inventory is known as the single most important item on a balance sheet. Every business contains inventory, and Ruckman, Inc. is no exception. With the concept of inventory come the different types of cost methods, including: last in first out (LIFO), first in first out (FIFO), and the weighted average cost. With such an important item, it is understandable that both standards allow and prohibit different types of costing methods due to certain reasons. The major difference between the two is the allowance of the LIFO method, which is only allowed by GAAP. This method allows companies to highlight

Maria Crane’s argument that manufacturing overhead costs should be reported as inventory costs until sold is uninformed. Her argument does not consider segment reporting in the various measures of the businesses manufacturing process. The argument thus does not allow the measurement and quantification of the contribution margin obtained from the sale of the company’s products manufactured at a particular time. In addition, her recommendation does not give segmented data the ability to be reported on an external basis thus allowing the evaluation of residual income (Accounting Tools, 2016a).