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Provide a critique of the accounting policy for inventory included in the financial statement in terms of the financial reporting standards

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter6: Receivables And Inventories

Section: Chapter Questions

Problem 18CDQ

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Concept explainers

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.

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The following information is taken from a companys records. Applying the lower-of-cost-or-market approach, what is the correct value that should be reported on the balance sheet for the inventory?
Rules of debit and credit for periodic inventory accounts Complete the following table by indicating for A through G whether the proper answer is debit or credit:
How long does it take an inventory error affecting ending inventory to correct itself in the financial statements? Explain.
Explain why a company might want to utilize the gross profit method or the retail inventory method for inventory valuation.
What are the exceptions to historical cost valuation of inventory allowed under generally accepted accounting principles?
Which of the following financial statements would be impacted by a current-year ending inventory error, when using a periodic inventory updating system? A. balance sheet B. income statement C. neither statement D. both statements
Considering the following information, and applying the lower-of-cost-or-market approach, what is the correct value that should be reported on the balance sheet for the inventory?
What is the difference in reporting requirements for customer-returned merchandise in sellable condition under a perpetual inventory system versus a periodic inventory system?
Under the periodic inventory system, the ending inventory is entered by debiting Merchandise Inventory and crediting Income Summary.
What is the basic assumption underlying the gross profit method? How may the gross profit percentage for the prior year be modified to provide a better estimate of the inventory value?
Which of the following is not an element of the financial statements? A. future potential sales price of inventory B. assets C. liabilities D. equity
Explain the dollar-value LIFO method of inventory valuation.