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- If the ending inventory of a firm is overstated by $49,000, by how much and in what direction (overstated or understated) will the firm's operating income be misstated? (Hint: Use the cost of goods sold model, enter hypothetically "correct" data, and then reflect the effects of the ending inventory error and determine the effect on cost of goods sold.) operating income ? By ?Samsung Electronics reports the following regarding its accounting for inventories. Inventories are stated at the lower of cost or net realizable value. Cost is determined using the average cost method, except for materials-in-transit. Inventories are reduced for the estimated losses arising from excess, obsolescence, and decline in value. This reduction is determined by estimating market value based on future customer demand. The losses on inventory obsolescence are recorded as a part of cost of sales. 1. What cost flow assumption(s) does Samsung apply in assigning costs to its inventories? 2. If at the current year-end there was an increase in the value of its inventories such that there was a reversal of W550 (W is Korean won) million for the write-down recorded in the prior year, how would Samsung account for this under IFRS? Would Samsung’s accounting be different for this reversal if it reported under U.S. GAAP? Explain.AVERAGE AND FIFO COSTING TRUE OF FALSE Indicate whether the following statements are true of false by inserting in the blank space provided a capital “T" for true of “F” for false. Using the FIFO method: If, for any period, the beginning Finished Goods Inventory is zero, then the average ending unit cost in Finished Goods Inventory is either a number between the unit cost in the beginning WIP inventory and the current period unit costs, or it is equal to the current period unit cost. Using the FIFO method: If the units transferred out exceeds the equivalent units in WIP beginning inventory, then the unit cost of the ending WIP inventory will equal the current period unit cost. Using the FIFO method: If the beginning WIP inventory is zero, then the unit cost of units transferred out will always equal the unit costs of the units in ending WIP inventory. Using the FIFO method: The number of units transferred out equals the number of units started and completed plus the equivalent units…
- Assume that the ending inventory of a merchandising firm is overstated by $40,000. a. By how much and in what direction (overstated or understated) will the firms cost of goods be misstated? b. If this error is not corrected, what effect will it have on the subsequent period's operating income? c. If this error is not corrected, what effect will it have on the total operating income of the two periods (the period in which there is an error and the subsequent period) combined?he following data refer to Billings Company’s ending inventory: Item Code Quantity Unit Cost Unit Market Small 45 $32 $38 Medium 60 46 44 Large 65 50 42 Extra-Large 35 54 53 How much is ending inventory if the lower of cost or net realizable value rule is applied to the total inventory?1.Given a particular set of factsand assumptions, the following pairs of amounts were computed using FIFO andLIFO. For each pair of amounts, indicate which amount resulted from applyingFIFO, and which amount resulted from applying LIFO. A. Prices are rising, ending inventory is:$20,650$19,400B. Prices are rising, cost of goods sold is:$10,650$9,400C. Prices are falling, ending inventory is:$5,500$5,000D. Prices are falling, cost of goods sold is:$6,200$7,000
- During a period of rising inventory prices, a company's cost of goods sold would be higher using the LIFO cost flow method than with FIFO. True or False True FalseZimt AG uses the FIFO method, and Nutmeg Inc. uses the LIFO method. Compared tothe cost of replacing the inventory, during periods of rising prices the ending inventorybalance reported by:A. Zimt is too high.B. Nutmeg is too low.C. Nutmeg is too high.Explain how operations would have differed in Year 2 and Year 3 if the company had been using Lean Production, with the result that ending inventory was zero
- The following information is for Lawrence Company, who uses the LIFO method: Item Cost NRV MinusNormal Profit Net RealizableValue ReplacementCost a $3.40 $2.79 $4.14 $4.65 b 36.00 28.80 32.40 27.60 c 2.40 1.32 1.56 1.94 d 6.00 5.55 6.15 6.30 e 24.00 20.40 22.80 21.00 f 13.35 10.55 12.30 12.90 1. Determine the lower of cost or market for each inventory item. Item Lower ofCost or Market Value a $ b $ c $ d $ e $ f $ 2. Now assume instead that the company uses FIFO and the inventory is valued using the LCNRV rule, determine the value of each inventory item. Item Lower ofCost or Net Realizable Value a $ b $ c $ d $ e $ f $The VARCOST2 worksheet is capable of calculating variable and absorption income when unit sales are equal to or less than production. An equally common situation (that this worksheet cannot handle) is when beginning inventory is present and sales volume exceeds production volume. Revise the worksheet Data Section to include: Beginning inventory in units 15,000 Beginning inventory cost (absorption) $266,875 Beginning inventory cost (variable) $210,000, Also, change actual production to 70,000. Revise the Answer Section to accommodate this new data. Assume that Anderjak uses the weighted-average costing method for inventory. Preview the printout to make sure that the worksheet will print neatly on one page, and then print the worksheet. Check figure: Absorption income, $670,000.The cost of goods sold and total operating expenses of a merchandising company are both understated by P5,300 and P 3,500 respectively. As a result of these errors, the company's gross margin is overstated (understated) by how much?