Question 1According to Singapore Financial Reporting Standards (International) (SFRS(I)) 1-2,Inventories, the cost of inventories "shall be assigned by using the first-in, first-out (FIFO) orweighted average cost formula" (SFRS(1) 1-2 Paragraph 25).First-in first-out (FIFO) methodThe FIFO method "assumes that the items of inventory that were purchased or produced firstare sold first, and consequently the items remaining in inventory at the end of the period arethose most recently purchased or produced" (SFRS(I) 1-2 Paragraph 27).Weighted average methodUnder the weighted-average method, "the cost of each item is determined from the weightedaverage of the cost of similar items at the beginning of a period and the cost of similar itemspurchased or produced during the period. The average may be calculated on a periodic basis,or as each additional shipment is received, depending upon the circumstances of the entity."(SFRS(1) 1-2 Paragraph 27).Effects of FIFO versus weighted average method in an environment of increasing pricesIn an environment of increasing prices, inventory purchased earlier during the year would costless than inventory purchased later during the year.Cost of goods sold based on FIFO, which assumes that older inventory is sold before newerinventory, would be lower than cost of goods sold based on weighted average. This means netprofit and total equity would be higher under FIFO than under the weighted average method.Ending inventory based on FIFO, which assumes that the remaining unsold inventory is thenewer inventory, would be higher than ending inventory based on weighted average. Thismeans net assets would be higher under FIFO than under the weighted average method.Required:Appraise the decision usefulness of FIFO versus weighted average method, based onthe value relevance perspective.(a)

This problem requires the comparison of the First-in, First-out inventory and the weighted average…

Answered: Required: (a) Appraise the decision…

Required: (a) Appraise the decision usefulness of FIFO versus weighted average method, based on the value relevance perspective.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter6: Cost Of Goods Sold And Inventory

Section: Chapter Questions

Problem 41BE: ( Appendix 6B) Inventory Costing Methods: Periodic Inventory Systems. Refer to the information for...

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( Appendix 6B) Refer to the information for Morgan Inc. above. If Morgan uses a periodic inventory system, what is the cost of goods sold under FIFO at April 30? a. $32,800 b. $38,400 c. $63,600 d. $69,200
( Appendix 6B) Inventory Costing Methods: Periodic Inventory System The inventory accounting records for Lee Enterprises contained the following data: Required: 1. Calculate the cost of ending inventory and the cost of goods sold using the FIFO, LIFO, and average cost methods. ( Note: Use four decimal places for per-unit calculations and round all other numbers to the nearest dollar.) 2. CONCEPTUAL CONNECTION Compare the ending inventory and cost of goods sold computed under all three methods. What can you conclude about the effects of the inventory costing methods on the balance sheet and the income statement?
( Appendix 6B) For each inventory costing method, perpetual and periodic systems yield the same amounts for ending inventory and cost of goods sold. Do you agree or disagree with this statement? Explain.
( Appendix 6B) Inventory Costing Methods: Periodic FIFO Refer to the information for Filimonov Inc. (p. 337) and assume that the company uses a periodic inventory system. Required: Calculate the cost of goods sold and the cost of ending inventory using the FIFO inventory costing method.
( Appendix 6B) Inventory Costing Methods: Periodic Inventory Systems. Refer to the information for Tyler Company in Brief Exercise 6-35 and assume that the company uses the periodic inventory system. Required: Calculate the cost of goods sold and the cost of ending inventory using the FIFO, LIFO, and average cost methods. ( Note: Use four decimal places for per-unit calculations and round all other numbers to the nearest whole dollar.)
( Appendix 6B) Inventory Costing Methods: Periodic System Harrington Company had the following data for inventory during a recent year: Assume that Harrington uses a periodic inventory accounting system. Required: 1. Using the FIFO, LIFO, and average cost methods, compute the ending inventory and cost of goods sold. ( Note: Use four decimal places for per-unit calculations and round all other numbers to the nearest dollar.) 2. CONCEPTUAL CONNECTION Which method will produce the most realistic amount for income? For inventory? 3. CONCEPTUAL CONNECTION Which method will produce the lowest amount paid for taxes?
Under U.S. GAAP, LIFO is an acceptable inventory method. Financial statement information for three companies that use LIFO follows. All table numbers are in millions of dollars. Assume these companies adopted IFRS, and thus were required to use FIFO, rather than LIFO. a. Prepare a table with the following columns: (1) Difference between FIFO and LIFO inventory valuation. (2) Revised IFRS net income using FIFO. (3) Difference between FIFO and LIFO inventory valuation as a percent of total current assets. (4) Revised IFRS net income as a percent of the reported net income. b. Complete the table for the three companies. c. For which company would a change to IFRS for inventory valuation have the largest percentage impact on total current assets (Col. 3)? d. For which company would a change to IFRS for inventory valuation have the largest percentage impact on net income (Col. 4)? e. Why might Kroger have a negative impact on net income from using LIFO, while the other two companies have a positive impact on net income from using LIFO?
( Appendix 6B) Refer to the information for Morgan Inc. above. If Morgan uses a periodic inventory system, what is the cost of ending inventory under LIFO at April 30? a. $32,800 b. $38,400 c. $63,600 d. $69,200
( Appendix 6B) Inventory Costing Methods Grencia Company uses a periodic inventory system. For 2018 and 2019, Grencia has the following data (assume all purchases and sales are for cash): Required: 1. Compute cost of goods sold, the cost of ending inventory, and gross margin for each year using FIFO. 2. Compute cost of goods sold, the cost of ending inventory, and gross margin for each year using LIFO. 3. Compute cost of goods sold, the cost of ending inventory, and gross margin for each year using the average cost method. ( Note: Use four decimal places for per unit calculations and round all other numbers to the nearest dollar.) 4. CONCEPTUAL CONNECTION Which method would result in the lowest amount paid for taxes? 5. CONCEPTUAL CONNECTION Which method produces the most realistic amount for income? For inventory? Explain your answer. 6. CONCEPTUAL CONNECTION What is the effect of purchases made later in the year on the gross margin when LIFO is employed? When FIFO is employed? Be sure to explain why any differences occur. 7. CONCEPTUAL CONNECTION If you worked Problem 6-68B, compare your answers. What are the differences? Be sure to explain why any differences occurred.
question 9 Which of the following items should be included in a company's inventory at the balance sheet date? Group of answer choices 1) Goods in transit which were purchased f.o.b. destination. 2) Goods received from another company for sale on consignment. 3)Goods in transit which were purchased f.o.b. shipping point. 4)None of these answer choices are correct
12.Which of the following statements is correct regarding the direct method of accounting for any write down of inventories to its net realizable value (NRV)? a. An Allowance to Reduce Inventory to Net Realizable Value account is used to record inventory at the lower of cost and NRV. b. The beginning and ending inventories are measured at the lower of cost and NRV when determining the cost of goods sold for the period. c. The beginning and ending inventories are measured at cost when determining the cost of goods sold for the period. d. The decline in NRV of inventory is reported as an other expense while recovery in NRV of inventory is reported as an other income.
1. Assume that Island Solutions applies LCNRV at the individual product level to determine the value of inventory that should be reported on the statement of financial position on September 30, 2023. 2. Assume Island Solutions applies LCNRV at the major group level and, for this purpose, places TA3 and TB3 Hubs in one major group, determine the value of inventory that should be reported on the statement of financial position on September 30, 2023.