close solutoin list

Various Inventory Issues Diane Company, a retailer and wholesaler of national brand-name household lighting fixtures, purchases its inventories from various suppliers. Diane uses the LIFO inventory method. Required: 1. a. What criteria are used to determine which of Diane’s costs are inventoriable? b. Are Diane’s administrative costs inventoriable? Defend your answer. 2. a. Diane uses the lower of cost or market rule for its wholesale inventories. Explain the theoretical arguments for that rule. b. The replacement cost of the inventories is below the net realizable value less a normal profit margin, which, in turn, is below the original cost. Explain the amount that is used to value the inventories. 3. Diane calculates the estimated cost of its ending inventories held for sale at retail using the conventional (lower of average cost or market) retail inventory method. Explain how Diane would treat the beginning inventories and net markdowns in calculating the cost ratio used to determine its ending inventories. could sell us enough of their products to last us three months. They have offered us a great price—lower than we have paid in a couple of years. Then I remembered that you use that funny LIFO retail inventory method where you play with such confusing numbers. Will the purchase reduce our retail ratio, or whatever you call it, so that our inventory is lower and cost of goods sold higher, because that would only make us look worse? Alternatively, I thought that we could delay this purchase until after January 1, and we might be able to have one of those LIFO liquid profits and make ourselves look good for the year’s results. Give these issues some thought and let’s have a drink after work today to discuss them.” Required: From financial reporting and ethical perspectives, how would you reply to Kelly?

BuyFind

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
Publisher: Cengage Learning
ISBN: 9781337788281
BuyFind

Intermediate Accounting: Reporting...

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

Solutions

Chapter
Section
Chapter 8, Problem 7C
Textbook Problem

Various Inventory Issues

Diane Company, a retailer and wholesaler of national brand-name household lighting fixtures, purchases its inventories from various suppliers. Diane uses the LIFO inventory method.

Required:

1.

  1. a. What criteria are used to determine which of Diane’s costs are inventoriable?
  2. b. Are Diane’s administrative costs inventoriable? Defend your answer.

2.

  1. a. Diane uses the lower of cost or market rule for its wholesale inventories. Explain the theoretical arguments for that rule.
  2. b. The replacement cost of the inventories is below the net realizable value less a normal profit margin, which, in turn, is below the original cost. Explain the amount that is used to value the inventories.

3. Diane calculates the estimated cost of its ending inventories held for sale at retail using the conventional (lower of average cost or market) retail inventory method. Explain how Diane would treat the beginning inventories and net markdowns in calculating the cost ratio used to determine its ending inventories. could sell us enough of their products to last us three months. They have offered us a great price—lower than we have paid in a couple of years. Then I remembered that you use that funny LIFO retail inventory method where you play with such confusing numbers. Will the purchase reduce our retail ratio, or whatever you call it, so that our inventory is lower and cost of goods sold higher, because that would only make us look worse? Alternatively, I thought that we could delay this purchase until after January 1, and we might be able to have one of those LIFO liquid profits and make ourselves look good for the year’s results. Give these issues some thought and let’s have a drink after work today to discuss them.”

Required:

From financial reporting and ethical perspectives, how would you reply to Kelly?

Expert Solution

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

See Solution

*Response times vary by subject and question complexity. Median response time is 34 minutes and may be longer for new subjects.

Chapter 8 Solutions

Intermediate Accounting: Reporting And Analysis
Show all chapter solutions
Ch. 8 - Under what conditions can inventory be valued...Ch. 8 - Describe five situations in which the gross profit...Ch. 8 - What is the basic assumption underlying the gross...Ch. 8 - What are the advantages of the retail inventory...Ch. 8 - What is the necessary condition for the retail...Ch. 8 - Explain the meaning of the following terms:...Ch. 8 - Describe how a company computes the cost-to-retail...Ch. 8 - What assumptions are necessary for the lower of...Ch. 8 - The retail inventory method indicated an inventory...Ch. 8 - Under what conditions would the dollar-value LIFO...Ch. 8 - Indicate the effect of each of the following...Ch. 8 - Sienna Company uses the FIFO cost flow assumption....Ch. 8 - Moore Company uses the LIFO cost flow assumption...Ch. 8 - A company uses the LIFO cost flow assumption. The...Ch. 8 - The following information is available for Silver...Ch. 8 - Hestor Companys records indicate the following...Ch. 8 - Under the retail inventory method, freight-in...Ch. 8 - The retail inventory method would include which of...Ch. 8 - At December 31, 2019, the following information...Ch. 8 - Estimates of price-level changes for specific...Ch. 8 - A company forgets to record a purchase on credit...Ch. 8 - Brown Company has the following information...Ch. 8 - Black Corporation uses the LIFO cost flow...Ch. 8 - Blue Corporation uses the FIFO cost flow...Ch. 8 - Paul Corporation uses FIFO and reports the...Ch. 8 - Using the information provided in RE8-4, prepare...Ch. 8 - Kays Beauty Supply uses the gross profit method to...Ch. 8 - Uncle Butchs Hunting Supply Shop reports the...Ch. 8 - Use the information in RE8-7. Calculate Uncle...Ch. 8 - Use the information in RE8-7. Calculate Uncle...Ch. 8 - Use the information in RE8-7. Calculate Uncle...Ch. 8 - Johnson Corporation had beginning inventory of...Ch. 8 - Borys Companys periodic inventory at December 31,...Ch. 8 - Refer to the information provided in RE8-4. If...Ch. 8 - Refer to the information provided in RE8-4. If...Ch. 8 - Inventory Write-Down Stiles Corporation uses the...Ch. 8 - Inventory Write-Down Stiles Corporation uses the...Ch. 8 - Inventory Write-Down Byron Company has five...Ch. 8 - Inventory Write-Down The following information for...Ch. 8 - Inventory Write-Down The following information is...Ch. 8 - Inventory Write-Down The inventories of Berry...Ch. 8 - Gross Profit Method: Estimation of Fire Loss On...Ch. 8 - Gross Profit Method: Estimation of Flood Loss On...Ch. 8 - Gross Profit Percentage An accountant sometimes...Ch. 8 - Gross Profit Method: Estimation of Theft Loss You...Ch. 8 - Retail Inventory Method Harmes Company is a...Ch. 8 - Retail Inventory Method The following data were...Ch. 8 - Retail Inventory Method The following information...Ch. 8 - Dollar-Value LIFO Retail Johns Company adopts the...Ch. 8 - Dollar-Value LIFO Retail Wyatt Company adopts the...Ch. 8 - Dollar-Value LIFO Retail On December 31, 2018,...Ch. 8 - Errors A company that uses the periodic inventory...Ch. 8 - Errors During the course of your examination of...Ch. 8 - (Appendix 8.1) Inventory Write-Down The...Ch. 8 - Inventory Write-Down Palmquist Company has five...Ch. 8 - Inventory Write-Down The following are the...Ch. 8 - Inventory Write-Down The inventory records of...Ch. 8 - Gross Profit Method: Estimation of Fire Loss On...Ch. 8 - Gross Profit Method: Estimation of Flood Loss On...Ch. 8 - Retail Inventory Method Turner Corporation uses...Ch. 8 - Retail Inventory Method EKC Company uses the...Ch. 8 - Retail Inventory Method Red Department Store uses...Ch. 8 - Retail Inventory Method Weber Corporation uses the...Ch. 8 - Dollar-Value LIFO Retail The following information...Ch. 8 - Dollar-Value LIFO Retail Intella Inc. adopted the...Ch. 8 - Dollar-Value LIFO Retail and Fire Loss Golden...Ch. 8 - Errors As controller of Lerner Company, which uses...Ch. 8 - Comprehensive: Inventory Adjustments Layne...Ch. 8 - (Appendix 8.1) Inventory Write-Down The following...Ch. 8 - (Appendix 8.1) Inventory Write-Down Frost Companys...Ch. 8 - Inventory Write-Down, Dollar-Value LIFO, and...Ch. 8 - Sandberg Paint Company, your client, manufactures...Ch. 8 - Lower of Cost or Net Realizable Value Rule Blaedon...Ch. 8 - Inventory Valuation Issues Hanlon Company...Ch. 8 - Gross Profit Shelly Corporation is an importer and...Ch. 8 - Retail Inventory Method Retail Inc. sells normal...Ch. 8 - Various Inventory Issues Diane Company, a retailer...Ch. 8 - Various Inventory Issues Hudson Company, which is...Ch. 8 - Analyzing Starbucks Inventory Disclosures Obtain...Ch. 8 - Analyzing Moet Hennessy Louis Vuittons (LVMH)...

Additional Business Textbook Solutions

Find more solutions based on key concepts
Show solutions
Define the term product

MKTG 12:STUDENT ED.-TEXT

CONSTANT GROWTH VALUATION Harmon Clothiers stock currently sells for 20.00 a share. It just paid a dividend of ...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)