ADVANCED FINANCIAL ACCOUNTING IA
12th Edition
ISBN: 9781260545081
Author: Christensen
Publisher: MCG
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Chapter 13, Problem 13.3.2E
To determine
Concept Introduction: Interim financial reporting is reporting of financial statements like Income Statement and
To select the correct option that which reporting practices is permissible for interim financial reporting.
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which of the following is not true regarding standards for interim reporting?
a. declines in inventory value should be deferred to future interim periods
b. use of the gross margin method for computing cost of goods sold must be disclosed
c. costs and expenses not directly associated with interim revenue must be allocated to interim period on a reasonable basis
d. gains and losses that arise in an interim period should be recognized in the interim period in which they arise if they would not normally be deferred at year end
1. Which of the following disclosures is required for a change from Average costing to FIFO?
a. The cumulative effect on prior years, net of tax, in the current income statement
b. The justification for the change
c. Pro forma data on income and earnings per share
d. All of these are required.
2. An example of a change in accounting principle that should be handled currently is a change from the
a. completed-contract method to the percentage-of-completion method for long-term contracts.
b. Average method to the FIFO method for inventory valuation.
c. sum-of-the-years'-digits method to the straight-line method.
d."full cost" method to another method in the extractive industry
If various batches of inventories have been purchased at different times during the year and at different prices, it may be impossible to determine precisely which items are still held at the year end and therefore what the actual purchase cost of the goods was. In such circumstances, the following estimation methods are allowed under IAS 2:
a) FIFO
b) Weighted average cost:
Explain the above methods, that is (a and b) and give examples where necessary?
Chapter 13 Solutions
ADVANCED FINANCIAL ACCOUNTING IA
Ch. 13 - Prob. 13.1QCh. 13 - Prob. 13.2QCh. 13 - What are the three 10 percent significance tests...Ch. 13 - Prob. 13.4QCh. 13 - A company has 10 industry segments, of which the...Ch. 13 - Prob. 13.6QCh. 13 - Prob. 13.7QCh. 13 - Prob. 13.8QCh. 13 - Prob. 13.9QCh. 13 - Prob. 13.10Q
Ch. 13 - Prob. 13.11QCh. 13 - Prob. 13.12QCh. 13 - Prob. 13.13QCh. 13 - Prob. 13.14QCh. 13 - Maness Company made a change in accounting for its...Ch. 13 - Prob. 13.1CCh. 13 - Prob. 13.2CCh. 13 - Prob. 13.3CCh. 13 - Prob. 13.7CCh. 13 - Prob. 13.8CCh. 13 - Prob. 13.9CCh. 13 - Reportable Segments Data for the seven operating...Ch. 13 - Prob. 13.2.1ECh. 13 - Prob. 13.2.2ECh. 13 - Prob. 13.2.3ECh. 13 - Prob. 13.2.4ECh. 13 - Prob. 13.2.5ECh. 13 - Prob. 13.2.6ECh. 13 - Prob. 13.2.7ECh. 13 - Prob. 13.2.8ECh. 13 - Prob. 13.2.9ECh. 13 - Prob. 13.2.10ECh. 13 - Prob. 13.2.11ECh. 13 - Prob. 13.3.1ECh. 13 - Prob. 13.3.2ECh. 13 - Multiple-Choice Questions on Interim Reporting...Ch. 13 - Prob. 13.3.4ECh. 13 - Prob. 13.3.5ECh. 13 - Prob. 13.3.6ECh. 13 - Prob. 13.3.7ECh. 13 - Prob. 13.3.8ECh. 13 - Prob. 13.3.9ECh. 13 - Prob. 13.3.10ECh. 13 - LIFO Liquidation During July, Laesch Company,...Ch. 13 - Inventory Write-Down and Recovery Cub Company, a...Ch. 13 - MutiniedChoice Questions on Income Taxes at...Ch. 13 - Prob. 13.6.2ECh. 13 - Prob. 13.6.3ECh. 13 - MutiniedChoice Questions on Income Taxes at...Ch. 13 - Prob. 13.6.5ECh. 13 - Prob. 13.6.6ECh. 13 - Prob. 13.7ECh. 13 - Prob. 13.8ECh. 13 - Prob. 13.9ECh. 13 - Prob. 13.10ECh. 13 - Prob. 13.11ECh. 13 - Prob. 13.12ECh. 13 - Prob. 13.13PCh. 13 - Prob. 13.14PCh. 13 - Interim Income Statement Chris Inc. has...Ch. 13 - Prob. 13.17PCh. 13 - Prob. 13.20PCh. 13 - Matching Terms Match the items in the left-hand...
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- Describe costing inventory using weighted average. Address the different treatment, if any, that must be given for periodic and perpetual inventory updating.arrow_forwardRequired: Match the following statements 1-10 the appropriate code letter A-C Statements 1-10 are as follows: Change due to understatement of inventory Change due to charging a new asset directly to an expense account Change from expensing to capitalizing certain costs, due to a change in periods benefited Change from FIFO to average cost inventory procedures Change due to failure to recognize an accrue (un-collected) revenue Change in amortization period for an intangible asset Change in expected recovery of an account receivable Change in the loss rate on warranty costs Change due to failure to recognize and accrue income Change in residual value of depreciable plant asset Codes A-C are as follows: A. Change in accounting policy B. Change in accounting estimate C. Error correction Statements 1-10 Codes A-C (select ONE code per statement) 1 2 3 4 5 6 7 8 9 10arrow_forward34.Which of the following statements is correct? a. Accounting for materials under FIFO is different when the entity is using the periodic inventory system and perpetual inventory system. b. Average method applied to periodic inventory system necessitates the computation of revised unit cost after every purchase. c. Average perpetual uses a single average unit cost of materials d. Total cost of materials available for use is the same whether the company is using FIFO or Average Method.arrow_forward
- Annan’s statement regarding the perpetual and periodic inventory systems is most significant when which of the following costing systems is used?A. LIFO.B. FIFO.C. Specific identificationarrow_forwardThe economic order quantity is not affected by the a. cost of purchase-order forms. b. safety stock level c. cost of insuring a unit of inventory for a year. d. estimate of the annual material consumption.arrow_forward1. If the inventory account at the end of the year is understated, the effect will be to a.overstate the gross profit on sales. b.understate the net purchases. c. overstate the cost of goods sold. d.overstate the goods available for sale 2. Which one among the following statements is not a characteristic of the integral view of presenting interim financial statements? a.It is the more acceptable view. b.Each interim period is recognized as a separate accounting period, regardless of the length of time involved. c. Each interim period is a part of the annual period. d.The revenues and expenses for the annual period are allocated among interim periods 3. What is correct concerning the 75% overall size test for operating segments? a. The total external and internal revenue of all reportable segments is 75% or more of the entity’s external revenue. b. The total external revenue of all reportable segments is 75% or more of the entity’s external and internal revenue. c. The total external…arrow_forward
- Which of the following methods for valuing inventory would most likely be used for standardized materials such as oil used in making gasoline? Select one: a. Weighted Average b. Specific Identification c. FIFO d. None of the optionsarrow_forwardSeveral errors are listed below. Indicate the effect each error would have on 2020 net income by selecting a plus sign (+), minus sign (-) or NI (no impact). Part (a) has been completed as an example. Effect on 2020Net Income a. Failed to record a 2020 expense. + b. Ending 2019 inventory is understated. c. Ending 2020 accrued expense is overstated. d. Ending 2020 inventory is overstated. e. Ending 2019 accrued revenue is understated. f. Ending 2020 prepaid expense is overstated. g. Ending 2019 unearned revenue is overstated. h. Ending 2020 accrued revenue was overstated. i. Ending 2019 prepaid expense was overstated. j. Ending 2019 accrued expense is overstated. k. Ending 2020 unearned revenue is understated.arrow_forward1. The specific eight-digit FASB Codification citation (XXX-XX-XX-X) that describes the meaning of cost as it applies to the initial measurement of inventory.2. The specific nine-digit FASB Codification citation (XXX-XXX-XX-X) that describes the circumstances when it is appropriate to initially measure agricultural inventory at fair value.3. The specific eight-digit FASB Codification citation (XXX-XX-XX-X) that describes the major objective of accounting for inventory.4. The specific eight-digit FASB Codification citation (XXX-XX-XX-X) that describes the abnormal freight charges included in the cost of inventory.arrow_forward
- Match each term with the correct description. First-in, first-out (FIFO) method Choose ] Choose Measure of the average number of days inventory is held; calculated as 365 divided by inventory turnover. Inventory costing method that assumes the costs of the latest units purchased are the first to be allocated to cost of goods sold. Last-in, first-out (LIFO) method An actual physical flow costing method in which items still in inventory are specifically costed to arrive at the total cost of the ending inventory. A basis whereby inventory is stated at the lower of either its cost or its net realizable value. Inventory costing method that assumes that the costs of the earliest goods purchased are the first to be recognized as cost of goods sold. That portion of manufactured inventory that has been placed into the production process but is not yet complete. Lower-of-cost-or-net realizable value (LCNRV) basis Specific identification method [ Choose ] Weighted-average unit cost [Choose ]arrow_forward26) Which of the following is a similarity between GAAP and IFRS with respect to accounting for inventories? a)Both standards use a ceiling or a floor to determine lower-of-cost-or-market. b)Both standards allow for reversals of write downs. c) The use of more principles based guidelines exist under both IFRS and GAAP standards. d) Inventory acquisitions are accounted for at historical cost.arrow_forwardWhich of the following statements is correct? Group of answer choices A)The choice of an inventory costing method is dependent upon the actual physical flow of the inventory. B)LIFO should be used during a period of increasing prices when the objective is to maximize the ending inventory value on the balance sheet. C)FIFO should be used during a period of decreasing prices when the objective is to maximize the gross profit reported on the balance sheet. D)The average cost method will result in an ending inventory balance which is somewhere between LIFO and FIFO when inventory prices are changing.arrow_forward
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