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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Inventory Write-Down, Dollar-Value LIFO, and Consignments

Caddell Company, a wholesaler, purchases its inventories from various suppliers FOB destination. It incurs substantial warehousing costs. Caddell uses the dollar-value LIFO inventory cost flow method, ('added also consigns some of its inventories to Reed Company.

Reed also has items for sale that it purchases from other wholesalers. Reed values its inventory at the lower of LIFO cost or market.

Required:

1. When are the purchases from various suppliers generally included in Caddell's inventory? Why?

2. Theoretically, how should Caddell account for the warehousing costs? Why?

3.

  1. a. Explain the advantages of using the dollar-value LIFO inventory cost flow method as opposed to the conventional quantity of goods LIFO method,
  2. b. How does the calculation of dollar value LIFO differ from the conventional quantity of goods method?

4. Explain how Caddell should account for the inventories consigned to Reed Company.

5. When Reed applies the lower of cost or market rule, what are the ceiling and floor limits?

1.

To determine

Find the period during when purchases from various suppliers included in the inventory of Company C.

Explanation

All the purchases from various suppliers are included in the inventory of C when it receives the goods. When the companies do not have any other in...

2.

To determine

Determine the accounting of warehousing costs.

3a.

To determine

Describe the advantages of dollar-value LIFO inventory cost flow method when compared to conventional quantity of goods LIFO method.

3b.

To determine

Explain the difference in calculation of the dollar-value LIFO and conventional quantity of goods method.

4.

To determine

Describe the accounting process for accounting the inventory consigned to R Company.

5.

To determine

What are the lower of cost or market rule and ceiling and floor limits applied by R.

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