FUND FINCL ACCT (LL) W/CONNECT >IB<
5th Edition
ISBN: 9781260036138
Author: PHILLIPS
Publisher: MCG
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Chapter 13, Problem 16Q
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Determine the difference of accounting policy that exists between Company T and Company E and the five ratios affected by this difference.
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Memphis Wholesale Market applies the lower of cost or net realizable valuation to individual products and has collected the following data: Product A Product B Product C Selling price $ 90 $ 115 $ 70 Cost 60 65 70 Costs to sell 14 19 9 Determine the inventory carrying value for Products A, B, and C assuming that Memphis Wholesale Market prepares its financial statements according to International Financial Reporting Standards (IFRS).
Memphis Wholesale Market applies the lower of cost or net realizable valuation to individual products and has collected the following data:
Product AProduct BProduct CSelling price$ 90$ 115$ 70Cost606570Costs to sell14199
Determine the inventory carrying value for Products A, B, and C assuming that Memphis Wholesale Market prepares its financial statements according to International Financial Reporting Standards (IFRS).
1. U.S. public companies using LIFO also report the amount that inventory wouldincrease (oroccasionally decrease) if the company had instead used FIFO.
See file please.
When comparing a US company that uses the last in, fi rst out (LIFO) method of inventory with companies that prepare their fi nancial statements under international fi nancialreporting standards (IFRS), analysts should be aware that according to IFRS, the LIFOmethod of inventory:A . is never acceptable.B . is always acceptable.C . is acceptable when applied to fi nished goods inventory only
Chapter 13 Solutions
FUND FINCL ACCT (LL) W/CONNECT >IB<
Ch. 13 - What is the general goal of trend analysis?Ch. 13 - Prob. 2QCh. 13 - What is ratio analysis? Why is it useful?Ch. 13 - What benchmarks are commonly used for interpreting...Ch. 13 - Prob. 5QCh. 13 - Prob. 6QCh. 13 - Slow Cellars current ratio increased from 1.2 to...Ch. 13 - From last year to this year, Colossal Companys...Ch. 13 - From last year to this year, Berry Bam reported...Ch. 13 - Explain whether the following situations, taken...
Ch. 13 - What are the two essential characteristics of...Ch. 13 - Prob. 12QCh. 13 - Prob. 13QCh. 13 - Prob. 14QCh. 13 - Prob. 15QCh. 13 - Prob. 16QCh. 13 - 1. Which of the following ratios is not used to...Ch. 13 - Prob. 2MCCh. 13 - Prob. 3MCCh. 13 - Analysts use ratios to a. Compare different...Ch. 13 - Which of the following ratios incorporates stock...Ch. 13 - Prob. 6MCCh. 13 - Prob. 7MCCh. 13 - A bank is least likely to use which of the...Ch. 13 - Prob. 9MCCh. 13 - (Supplement 13A) Which of the following items is...Ch. 13 - Calculations for Horizontal Analyses Using the...Ch. 13 - Calculations for Vertical Analyses Refer to M13-1....Ch. 13 - Interpreting Horizontal Analyses Refer to the...Ch. 13 - Interpreting Vertical Analyses Refer to the...Ch. 13 - Prob. 5MECh. 13 - Prob. 6MECh. 13 - Prob. 7MECh. 13 - Analyzing the Inventory Turnover Ratio A...Ch. 13 - Inferring Financial Information Using the Current...Ch. 13 - Prob. 10MECh. 13 - Identifying Relevant Ratios Identify the ratio...Ch. 13 - Prob. 12MECh. 13 - Analyzing the Impact of Accounting Alternatives...Ch. 13 - Describing the Effect of Accounting Decisions on...Ch. 13 - Prob. 1ECh. 13 - Prob. 2ECh. 13 - Prob. 3ECh. 13 - Prob. 4ECh. 13 - Prob. 5ECh. 13 - Matching Each Ratio with Its Computational Formula...Ch. 13 - Computing and Interpreting Selected Liquidity...Ch. 13 - Prob. 8ECh. 13 - Prob. 9ECh. 13 - Prob. 10ECh. 13 - Prob. 11ECh. 13 - Prob. 12ECh. 13 - Prob. 13ECh. 13 - Prob. 14ECh. 13 - Analyzing the Impact of Alternative Inventory...Ch. 13 - Prob. 1CPCh. 13 - Prob. 2CPCh. 13 - Prob. 3CPCh. 13 - Prob. 4CPCh. 13 - Prob. 5CPCh. 13 - Prob. 6CPCh. 13 - Prob. 7CPCh. 13 - Prob. 1PACh. 13 - Prob. 2PACh. 13 - Prob. 3PACh. 13 - Prob. 4PACh. 13 - Prob. 5PACh. 13 - Using Ratios to Compare Loan Requests from Two...Ch. 13 - Prob. 7PACh. 13 - Prob. 1PBCh. 13 - Prob. 2PBCh. 13 - Prob. 3PBCh. 13 - Prob. 4PBCh. 13 - Prob. 5PBCh. 13 - Using Ratios to Compare Loan Requests from Two...Ch. 13 - Prob. 7PBCh. 13 - Prob. 1SDCCh. 13 - Prob. 2SDCCh. 13 - Prob. 5SDCCh. 13 - Prob. 6SDCCh. 13 - Prob. 7SDCCh. 13 - Prob. 1CC
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- If costs are rising, which inventory costing method will result in the lowest income tax expense for the company? Group of answer choices LIFO Specific identification FIFO Weighted average Which of the inventory costing methods is not permitted under International Financial Reporting Standards? Group of answer choices FIFO Specific identification LIFO Weighted average costarrow_forward3.What is the purpose of the current ratio? Assume that Island Solutions want to compute its current ratio, which inventory method (FIFO or Average Cost) would give a more meaningful current ratio. Explain. 4.Island Solutions has discovered that all of its competitors are using another inventory method and is worried. Can the company change its inventory accounting method, on what grounds? Discuss two (2) trade-offs for the company.arrow_forwardChoose the correct. Under current U.S. accounting guidelines, which of the following items of information is a company not required to disclose, even if it were material in amount?a. Revenues generated from sales of its consumer products line of goods.b. Revenues generated by its Japanese subsidiary.c. Revenues generated from export sales.d. Revenues generated from sales to Walmart.arrow_forward
- Swing Ltd uses FIFO for its inventory, which is valued at $21,000. It is considering a change to moving weighted average, which would change the valuation of inventory to $22,500. Which of the following would be decreased by the change? Cost of goods sold b. Sales c. Liabilities d. Withdrawalsarrow_forwardSwing Ltd uses FIFO for its inventory, which is valued at $21,000. It is considering a change to moving weighted average, which would change the valuation of inventory to $22,500. Which of the following would be decreased by the change? a.Cost of goods sold b.Sales c.Liabilities d.Withdrawalsarrow_forwardThe Northern Mariana Islands is an insular area and commonwealth of the United States consisting of 14 islands in the northwestern Pacific Ocean. Firms located on the Northern Mariana Islands could choose to report under US GAAP or IFRS. The islands suffer from continuous deflation (i.e. a decrease in the general price level of goods and services) during recent years. For the firms operating in the Northern Mariana Islands, which inventory method is more likely to report a higher level of Ending Inventory? Select one: a. First in, first out (FIFO) b. Last in, first out (LIFO) c. Weighted average d. FIFO, LIFO and weighted average methods report the same level of ending inventoryarrow_forward
- Under current U.S. accounting guidelines, which of the following items of information is a company not required to disclose, even if it were material in amount?a. Revenues generated from sales of its consumer products line of goods.b. Revenues generated by its Japanese subsidiary.c. Revenues generated from export sales.d. Revenues generated from sales to Walmart.arrow_forwardIFRS9-2. LaTour Inc. is based in France and prepares its financial statements in accordance with IFRS. In 2017, it reported cost of goods sold of $578 million and average inventory of $154 million. Briefly discuss how analysis of LaTour's inventory turnover (and comparisons to a company using GAAP) might be affected by differences in inventory accounting between IFRS and GAAP.arrow_forwardSuppose you were comparing a discount merchandiser with a high-end merchandiser.Suppose further that both companies had identical ROEs. If you applied the DuPontequation to both firms, would you expect the three components to be the same for eachcompany? If not, explain what balance sheet and income statement items might lead to thecomponent differences.arrow_forward
- The following example was provided to encourage the use of the LIFO method. In a nutshell, LIFO subtracts inflation from inventory costs, deducts it from taxable income, and records it in a LIFO reserve account on the books. The LIFO benefit grows as inflation widens the gap between current-year and past-year (minus inflation) inventory costs. This gap is: With LIFO Without LIFO Revenues $3,200,000 $3,200,000 Cost of goods sold 2,800,000 2,800,000 Operating expenses 150,000 150,000 Operating income 250,000 250,000 LIFO adjustment 40,000 0 Taxable income $ 210,000 $ 250,000 Income taxes (36%) $ 75,600 $ 90,000 Cash flow $ 174,400 $ 160,000 Extra cash $ 14,400 0 Increased cash flow 9% 0% Instructions a. Explain what is meant by the LIFO reserve account. b. How does LIFO subtract inflation from inventory costs? c. Explain how the cash flow of $174,400 in this example was computed. Explain why this…arrow_forwardMayfair Department Stores, Inc., operates over 30 retail stores in the Pacific Northwest. Prior to 2016, the company used the FIFO method to value its inventory. In 2016, Mayfair decided to switch to the dollar-value LIFO retail inventory method. One of your responsibilities as assistant controller is to prepare the disclosure note describing the change in method that will be included in the company’s 2016 financial statements. Kenneth Meier, the controller, provided the following information: • Internally developed retail price indexes are used to adjust for the effects of changing prices. • If the change had not been made, cost of goods sold for the year would have been $22 million lower. The company’s income tax rate is 40% and there were 100 million shares of common stock outstanding during 2016. • The cumulative effect of the change on prior years’ income is not determinable. • The reasons for the change were (a) to provide a more consistent matching of merchandise costs with…arrow_forwardCisco Systems is a global provider of networking equipment. In its third quarter 2001 Form 10-Q filed with the US Securities and Exchange Commission (US SEC) on 1 June 2001, the company made the following disclosure: We recorded a provision for inventory, including purchase commitments, totalling $2.36 billion in the third quarter of fiscal 2001, of which $2.25 billion related to an additional excess inventory charge. Inventory purchases and commitments are based upon future sales forecasts. To mitigate the component supply constraints that have existed in the past, we built inventory levels for certain components with long lead times and entered into certain longer-term commitments for certain components. Due to the sudden and significant decrease in demand for our products, inventory levels exceeded our requirements based on current 12-month sales forecasts. Th is additional excess inventory charge was calculated based on the inventory levels in excess of 12-month demand for each…arrow_forward
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