e sale of inventory items by a parent company to an affiliated company a. enters the consolidated revenue computation only if the transfer was the result of arm's length bargaining. b. affects consolidated net income under a periodic inventory system but not under a perpetual inventory system. c. does not r

e sale of inventory items by a parent company to an affiliated company a. enters the consolidated revenue computation only if the transfer was the result of arm's length bargaining. b. affects consolidated net income under a periodic inventory system but not under a perpetual inventory system. c. does not r

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter7: Inventories: Cost Measurement And Flow Assumptions

Section: Chapter Questions

Problem 12GI: Consider each of the following independent situations. Should a company report the goods in its...

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Consider each of the following independent situations. Should a company report the goods in its inventory? (a) Goods purchased by the company with shipping terms FOB shipping point that are in transit at the end of the year (b) Goods received by the company on consignment (c) An estimate of the amount of goods sold by the company that it expects the buyer to return (d) Goods required to be purchased by the company under an unconditional purchase obligation
Which of the following statements is incorrect? Select one: a. By using the IFRS, goods shipped on consignment from a seller to another company should be included in the inventory of the seller. b. Many argue that LIFO provides a better matching of current costs against revenue from a financial reporting point of view. c. Both IFRS and GAAP account for inventory acquisitions at historical cost and value inventory at the lower-of-cost-or-net-realizable value subsequent to acquisition. d. Both inventory and net income are higher when companies use LIFO in a period of inflation.
The consolidation procedures for intercompany sales are similar for upstreamand downstreams sales A. Under a periodic inventory system but not under a perpetual inventory system B. When the subsidiary is 100% owned. C. If the merchandise is immediately sold to outside parties D. If the merchandise is transferred at cost
Which one of the following statements is not true? a. A company using the periodic system does not maintain a continuous record of the physical quantities (or costs) of inventory on hand. b. In the periodic system, the costs of acquisition of inventory are not debited directly to an inventory account. c. In the perpetual inventory system, recording in detailed subsidiary records can be in units only-not in dollar costs. d. When the perpetual system is used, a physical count does not need to be made periodically.
When a company uses LIFO for external reporting purposes FIFO for internal reporting pusposes, an Allowance to Reduce Inventory to LIFO account is used. This account should be reported? A) on the income statement in the other Revenue and gains section. B) on the income statement in the cost of goods sold section. C) on the income statement in the other Expenses and losses section. D) on the balance sheet in the current asset section.
If the net realizable of an entity's inventories is less than its cost, the entry to adjust the balance of the inventory assuming the entity uses the allowance method will involve a A. Debit to inventory B. Debit to loss on inventory write-down C. Credit to inventory. D. Credit to loss on inventory write-down
In accounting for by-products, when the by-products are sold for more than the estimated sales value, the difference is: a. credited to Gain or Loss on Sale of By-Product b. debited to Gain or Loss on Sale of By-Product c. immaterial, so not recorded. d. credited to By-Product Inventory.
State how each of the following items is reflected in thefinancial statements.(a) Change from FIFO to LIFO method for inventoryvaluation purposes.(b) Charge for failure to record depreciation in a previousperiod.(c) Litigation won in current year, related to prior period.(d) Change in the realizability of certain receivables.(e) Write-off of receivables.(f) Change from the percentage-of-completion to thecompleted-contract method for reporting net income.
The accountant for the Fred Company did not record a purchase of merchandise on credit or include the items in the ending inventory. The effect of these omissions on assets, liabilities, and retained earnings would be (assume a periodic inventory system): Assets Liabilities Retained Earnings a. Understate Understate Understateb. Understate Understate No effectc. No effect Understate No effectd. Understate No effect Understate
Carey Company adheres to U.S. GAAP, whereas Jonathan Company adheres to IFRS. Itis least likely that:A. Carey has reversed an inventory write-down.B. Jonathan has reversed an inventory write-down.C. Jonathan and Carey both use the FIFO inventory accounting method.
Which term is applied to the excess of revenue from sales over the cost of merchandise sold? a.net income b.gross sales c.income from operations d.gross profit the inventory system employing accounting records that continuously disclose the amount of inventory is called a.retail b.periodic c.physical d.perpetual
why would a corporate entity mark up inventory when selling on an intercompany basis?

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a.	enters the consolidated revenue computation only if the transfer was the result of arm's length bargaining.
b.	affects consolidated net income under a periodic inventory system but not under a perpetual inventory system.
c.	does not result in consolidated income until the merchandise is sold to outside entities.
d.	does not require a working paper adjustment if the merchandise was transferred at cost.