INTERMEDIATE ACCOUNTING RMU 9TH EDITION
9th Edition
ISBN: 9781260998726
Author: SPICELAND
Publisher: MCG
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Textbook Question
Chapter 20, Problem 20.4BYP
Analysis Case 20–4
Change in inventory methods; concepts
• LO20–2, LO20–3
Generally accepted accounting principles should be applied consistently from period to period. However, changes within a company, as well as changes in the external economic environment, may force a company to change an accounting method. The specific reporting requirements when a company changes from one generally accepted inventory method to another depend on the methods involved.
Required:
Explain the accounting treatment for a change in inventory method (a) not involving LIFO, (b) from the LIFO method, and (c) to the LIFO method. Explain the logic underlying those treatments. Also, describe how disclosure requirements are designed to address the departure from consistency and comparability of changes in accounting principle.
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Problem 11-25 Multiple choice (IAA)
1. IFRS prohibits which cost flow assumption?
a. LIFO
b. Specific identification
6. Weighted average
i Any of these cost flow assumptions is allowed
с.
, What is the inventory pricing procedure in which the
oldest costs rarely have an effect on the ending
inventory?
a. FIFO
b. LIFO
c. Specific identification
d. Weighted average
3. In a period of falling prices which inventory method
generally provides the lowest amount of ending
inventory?
a. Weighted average
b. FIFO
c. Moving average
d. Specific identification
4. Which inventory cost flow assumption would consistently
result in the highest income in a period of rising prices
or inflation?
a. FIFO
b. LIFO
c. Weighted average
d. Specific identification
3. The costing of inventory must be deferred until the end
of reporting period under which of the following method of
inventory valuation?
a. Moving average
b. Weighted average
c. LIFÓ perpetual
d. FIFO perpetual
Question no 6
Errors occasionally occur when physically counting inventory items on hand. Identify the financial
statement effects of an overstatement of the ending inventory in the current period. If the error is not
corrected, how does it affect the financial statements for the following year? How is it possible for a
company to suffer a net loss for a given year, yet produce a positive net cash flow from operating
activities?
Question 63
Modified True or False
T means Correct and F means Wrong
I. The longer its customers normally hold inventory, the longer the credit period supplier firms normally offer. Still, suppliers have some flexibility in the credit terms they offer. If a supplier lengthens the credit period offered, this will shorten the customer's cash conversion cycle but lengthen the supplier firm's own CCC.
II. The cash conversion cycle (CCC) combines three factors: The inventory conversion period, the receivables collection period, and the payables deferral period, and its purpose is to show how long a firm must finance its working capital. Other things held constant, the shorter the CCC, the more effective the firm's working capital management.
III. The target cash balance is typically (and logically) set so that it does not need to be adjusted for either seasonal patterns or unanticipated random fluctuations.
IV. A firm's peak borrowing needs will probably be overstated if it bases its…
Chapter 20 Solutions
INTERMEDIATE ACCOUNTING RMU 9TH EDITION
Ch. 20 - Prob. 20.1QCh. 20 - There are three basic accounting approaches to...Ch. 20 - Prob. 20.3QCh. 20 - Lynch Corporation changes from the...Ch. 20 - Sugarbaker Designs Inc. changed from the FIFO...Ch. 20 - Most changes in accounting principles are recorded...Ch. 20 - Southeast Steel, Inc., changed from the FIFO...Ch. 20 - Prob. 20.8QCh. 20 - Its not easy sometimes to distinguish between a...Ch. 20 - For financial reporting, a reporting entity can be...
Ch. 20 - Prob. 20.11QCh. 20 - Describe the process of correcting an error when...Ch. 20 - Prob. 20.13QCh. 20 - If it is discovered that an extraordinary repair...Ch. 20 - Prob. 20.15QCh. 20 - Change in inventory methods; FIFO method to the...Ch. 20 - Change in inventory methods; average cost method...Ch. 20 - Change in inventory methods; FIFO method to the...Ch. 20 - Change in depreciation methods LO203 Irwin, Inc.,...Ch. 20 - Prob. 20.5BECh. 20 - Book royalties LO204 Three programmers at Feenix...Ch. 20 - Warranty expense LO204 In 2017, Quapau Products...Ch. 20 - Change in estimate; useful life of patent LO204...Ch. 20 - Prob. 20.9BECh. 20 - Error correction LO206 In 2018, internal auditors...Ch. 20 - Prob. 20.11BECh. 20 - Error correction LO206 In 2018, the internal...Ch. 20 - Change in principle; change in inventory methods ...Ch. 20 - Change in principle; change in inventory methods ...Ch. 20 - Change from the treasury stock method to retired...Ch. 20 - Change in principle; change to the equity method ...Ch. 20 - Prob. 20.5ECh. 20 - FASB codification research LO202 Access the FASB...Ch. 20 - Change in principle; change in inventory cost...Ch. 20 - Change in inventory methods; FIFO method to the...Ch. 20 - Change in inventory methods; FIFO method to the...Ch. 20 - Change in depreciation methods LO203 For...Ch. 20 - Change in depreciation methods LO203 The Canliss...Ch. 20 - Book royalties LO204 Dreighton Engineering Group...Ch. 20 - Loss contingency LO204 The Commonwealth of...Ch. 20 - Warranty expense LO204 Woodmier Lawn Products...Ch. 20 - Prob. 20.15ECh. 20 - Accounting change LO204 The Peridot Company...Ch. 20 - Change in estimate; useful life and residual value...Ch. 20 - Classifying accounting changes LO201 through...Ch. 20 - Error correction; inventory error LO206 During...Ch. 20 - Error corrections; investment LO206 Required: 1....Ch. 20 - Prob. 20.21ECh. 20 - Prob. 20.22ECh. 20 - Prob. 20.23ECh. 20 - Inventory errors LO206 Indicate with the...Ch. 20 - Classifying accounting changes and errors LO201...Ch. 20 - Change in inventory costing methods; comparative...Ch. 20 - P 20-2 Change in principle; change in method of...Ch. 20 - Change in inventory costing methods; comparative...Ch. 20 - Change in inventory methods LO202 The Rockwell...Ch. 20 - Change in inventory methods LO202 Fantasy...Ch. 20 - Change in principle; change in depreciation...Ch. 20 - Depletion; change in estimate LO204 In 2018, the...Ch. 20 - Accounting changes; six situations LO201, LO203,...Ch. 20 - Prob. 20.9PCh. 20 - Inventory errors LO206 You have been hired as the...Ch. 20 - Error correction; change in depreciation method ...Ch. 20 - Accounting changes and error correction; seven...Ch. 20 - Prob. 20.13PCh. 20 - Prob. 20.14PCh. 20 - Prob. 20.15PCh. 20 - Prob. 20.16PCh. 20 - Prob. 20.17PCh. 20 - Integrating Case 201 Change to dollar-value LIFO ...Ch. 20 - Prob. 20.2BYPCh. 20 - Prob. 20.3BYPCh. 20 - Analysis Case 204 Change in inventory methods;...Ch. 20 - Prob. 20.5BYPCh. 20 - Prob. 20.6BYPCh. 20 - Analysis Case 208 Various changes LO201 through...Ch. 20 - Analysis Case 209 Various changes LO201 through...Ch. 20 - Prob. 20.10BYPCh. 20 - Prob. 20.11BYPCh. 20 - Prob. 20.12BYPCh. 20 - Prob. 1CCTC
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