ADVANCED ACCOUNTING W/ACCESS >CUSTOM<
14th Edition
ISBN: 9781307594683
Author: Hoyle
Publisher: MCG/CREATE
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Chapter 8, Problem 17Q
To determine
Describe how a company should handle LIFO liquidation in an interim period when the liquidated inventory is expected to be replaced by year-end.
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How should a company handle a LIFO liquidation in an interim period when the liquidated inventory is expected to be replaced by year-end?
How should a company handle a LIFO liquidation in an interim period when the liquidated inventory is expected to be replaced by year-end?
The management of Knight Company has asked its accountingdepartment to describe the effect upon the company’s financial position and its income statements of accounting for inventories onthe LIFO rather than the FIFO basis during 2020 and 2021. The accounting department is to assume that the change to LIFO wouldhave been effective on January 1, 2020, and that the initial LIFO base would have been the inventory value on December 31, 201Presented below are the company’s financial statements and other data for the years 2020 and 2021 when the FIFO method wasemployed.Financial Position as of12/31/19 12/31/20 12/31/21Cash $ 50,000 $ 75,000 $ 90,000Accounts receivable 160,000 200,000 220,000Inventory 280,000 315,000 336,000Other assets 200,000 220,000 245,000Total assets $690,000 $810,000 $891,000Accounts payable $220,000 $235,000 $250,000Other liabilities 80,000 90,000 120,000Common stock 100,000 100,000 100,000Retained earnings 290,000 385,000 421,000Total liabilities and equity $690,000…
Chapter 8 Solutions
ADVANCED ACCOUNTING W/ACCESS >CUSTOM<
Ch. 8 - Prob. 1QCh. 8 - Prob. 2QCh. 8 - Prob. 3QCh. 8 - The management approach requires a firm to define...Ch. 8 - What is an operating segment?Ch. 8 - Prob. 6QCh. 8 - Prob. 7QCh. 8 - Prob. 8QCh. 8 - Prob. 9QCh. 8 - Prob. 10Q
Ch. 8 - Prob. 11QCh. 8 - To satisfy geographic area disclosure...Ch. 8 - Prob. 13QCh. 8 - Prob. 14QCh. 8 - Prob. 15QCh. 8 - Prob. 16QCh. 8 - Prob. 17QCh. 8 - How does a company determine the amount of income...Ch. 8 - Prob. 19QCh. 8 - Prob. 20QCh. 8 - What type of segment information must companies...Ch. 8 - How would an annual bonus paid at year-end be...Ch. 8 - Which of the following does U.S. GAAP not consider...Ch. 8 - Prob. 2PCh. 8 - Prob. 3PCh. 8 - Prob. 4PCh. 8 - Prob. 5PCh. 8 - Which of the following is not necessarily true for...Ch. 8 - Prob. 7PCh. 8 - Prob. 8PCh. 8 - Prob. 9PCh. 8 - Which of the following items is required to be...Ch. 8 - Prob. 11PCh. 8 - Prob. 12PCh. 8 - Which of the following information items with...Ch. 8 - Prob. 14PCh. 8 - In considering interim financial reporting, how...Ch. 8 - How should material seasonal variations in revenue...Ch. 8 - Prob. 17PCh. 8 - Prob. 18PCh. 8 - Prob. 19PCh. 8 - Niceville Company pays property taxes of 100,000...Ch. 8 - Prob. 21PCh. 8 - Prob. 22PCh. 8 - Prob. 23PCh. 8 - Prob. 24PCh. 8 - Prob. 25PCh. 8 - Prob. 26PCh. 8 - Prob. 27PCh. 8 - Prob. 28PCh. 8 - Prob. 29PCh. 8 - Prob. 30PCh. 8 - Prob. 31PCh. 8 - Prob. 32PCh. 8 - Prob. 33PCh. 8 - Prob. 34PCh. 8 - Prob. 35PCh. 8 - Prob. 36PCh. 8 - Prob. 37PCh. 8 - Prob. 38PCh. 8 - Noventis Corporation prepared the following...
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- Assume prices were stable during the period. The following values were obtained from the inventory records of Harris Company which has a fiscal year ending on December 31: Inventory, January 1, 2019, LIFO $80,000 Inventory, March 31, 2019, LIFO 70,000 Required: 1. Under what conditions is Harris’s inventory liquidation not reflected in its first-quarter interim financial statements? 2. Assuming that the liquidation is not to be reflected, what adjusting entry would Harris make?arrow_forwardThe management of Tritt Company has asked its accounting department to describe the effect upon the company's financial position and its income statements of accounting for inventories on the LIFO rather than the FIFO basis during 2020 and 2021. The accounting department is to assume that the change to LIFO would have been effective on January 1, 2020, and that the initial LIFO base would have been the inventory value on December 31, 2019. The following are the company's financial statements and other data for the years 2020 and 2021 when the FIFO method was employed. Financial Position as of 12/31/19 12/31/20 12/31/21 Cash $ 90,000 $130,000 $154,000 Accounts receivable 80,000 100,000 120,000 Inventory 120,000 140,000 176,000 Other assets 160,000 170,000 200,000 Total assets $450,000 $540,000 $650,000 Accounts payable $ 40,000 $ 60,000 $ 80,000 Other liabilities 70,000 80,000 110,000 Common stock 200,000 200,000 200,000 Retained earnings…arrow_forwardWhat happens when a company learns of the bankruptcy of a customer that occurs after the year end what does the company have to doarrow_forward
- 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 statementsarrow_forwardAn entity reported the following events during 2020: It was decided to write-off P800,000 of obsolete inventory. A counting error relating to the inventory on December 31, 2019 was discovered. This required a reduction in the carrying amount of inventory at that date of P300,000. Sales of P600,000 had been omitted from the financial statements for the year ended December 31, 2019. The provision for uncollectible accounts receivable on December 31, 2019 was P300,000. During 2020, P500,000 was written off the December 31, 2019 accounts receivable. What pretax total amount should be reported as prior period errors in 2020?arrow_forwardIn perpetual inventory system, the stock taking is done at the end of the year. Select one: True Falsearrow_forward
- If a company has goods in transit at the end of the year that were shipped FOB shipping point, how should these goods be accounted for on the company's books at the end of the year? a.The goods should be included in the inventory value at the end of the year. b.Half of the value of the goods in transit should be included in the inventory value at the end of the year. c.The goods should be excluded from the inventory value at the end of the year. d.The goods should be considered held for sale on consignment at the end of the year.arrow_forwardA. Assuming that the company had the following beginning balances in its allowance for inventory write down accounts: FG – P60,000; WIP – P0; RM – P60,000, what is the total loss on inventory write-down to be recognized for the year?B.arrow_forwardUnder IFRS 15, what is the net income/(loss) to be reported by the companyfor the year ended December 31, 2018?arrow_forward
- What is the retained earnings balance on January 1,2019 before restatement?arrow_forwardExplain how interim financial statements areprepared in a business that closes its accountsonly at year-end.arrow_forward1. What amount should be reported as the pretax cumulative effect of this accounting change? During 2021, Revel Company decided to change from the FIFO method of inventory valuation to weighted average method. a. 400,000 b. 300,000 c. 600,000 d. 500,000 January 1 inventory December 31 inventory FIFO 7,200,000 7,900,000 2. What total amount should be reported as prior period error in the financial statements for the year ended December 31, 2020? a. 1,400,000 b. 600,000 WEIGHTED AVERAGE 7,700,000 8,300,000 ABC Company reported the ff events during 2020: • It was decided to write off 800,000 from inventory which was over two years old as it was obsolete. c.800,000 d. 200,000 • Sales of 600,000 had been omitted from the financial statements for the year ended December 31,2019arrow_forward
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