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Business

Accounting

Understand and apply rules for measurement of inventory at the end of the reporting period.

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter14: Adjustments For A Merchandising Business

Section: Chapter Questions

Problem 2TF: Under the periodic inventory system, the ending inventory is entered by debiting Merchandise...

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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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Under the periodic inventory system, the ending inventory is entered by debiting Merchandise Inventory and crediting Income Summary.
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
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.
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?
Using the partial work sheet provided below, prepare the adjusting entries for merchandise inventory.
DETERMINING THE BEGINNING AND ENDING INVENTORY FROM A PARTIAL WORK SHEET: PERIODIC INVENTORY SYSTEM From the following partial work sheet, indicate the dollar amount of beginning and ending merchandise inventory:
Prepare journal entries to record the following transactions, assuming periodic inventory updating and first-in, first-out (FIFO) cost allocation.
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?
Based on the data in Exercise 6-15 part (a) and assuming that cost was determined by the FIFO method, show how the inventory would appear on the balance sheet.
Prepare Journal entries to record the following transactions, assuming perpetual inventory updating, and last-in, first-out (LIFO) cost allocation. Assume no beginning inventory.
Which of the following describes features of a perpetual inventory system? A. Technology is normally used to record inventory changes. B. Merchandise bought is recorded as purchases. C. An adjusting journal entry is required at year end, to match physical counts to the asset account. D. Inventory is updated at the end of the period.