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Intermediate Accounting

Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield

Chapter 9

Inventories: Additional Valuation Issues - all with Video Answers

Educators

Chapter Questions

12:40

Problem 1

Where there is evidence that the utility of inventory goods, as part of their disposal in the ordinary course of business, will be less than cost, what is the proper accounting treatment?

Paul A.
Paul A.
California State Polytechnic University, Pomona
02:53

Problem 2

Explain the rationale for the ceiling and floor in the lowerof-cost-or-market method of valuing inventories.

Yang Su
Yang Su
Numerade Educator
03:10

Problem 3

Why are inventories valued at the lower-of-cost-ormarket? What are the arguments against the use of the LCM method of valuing inventories?

Tommy Nguyen
Tommy Nguyen
Numerade Educator
02:20

Problem 4

What approaches may be employed in applying the lowerof-cost-or-market procedure? Which approach is normally used and why?

Ameer Said
Ameer Said
Numerade Educator
06:35

Problem 5

In some instances accounting principles require a departure from valuing inventories at cost alone. Determine the proper unit inventory price in the following cases.

Puneet Prajapati
Puneet Prajapati
Numerade Educator
02:51

Problem 6

What method(s) might be used in the accounts to record a loss due to a price decline in the inventories? Discuss.

Oluwadamilola Ameobi
Oluwadamilola Ameobi
Numerade Educator
08:44

Problem 7

What factors might call for inventory valuation at sales prices (net realizable value or market price)?

Paul A.
Paul A.
California State Polytechnic University, Pomona
08:44

Problem 8

Under what circumstances is relative sales value an appropriate basis for determining the price assigned to inventory?

Paul A.
Paul A.
California State Polytechnic University, Pomona
00:49

Problem 9

At December 31,2011 , Ashley Co. has outstanding purchase commitments for purchase of 150,000 gallons, at $\$ 6.20$ per gallon, of a raw material to be used in its manufacturing process. The company prices its raw material inventory at cost or market, whichever is lower. Assuming that the market price as of December $31,2011,$ is $\$ 5.90,$ how would you treat this situation in the accounts?

Sriram Soundarrajan
Sriram Soundarrajan
Numerade Educator
00:48

Problem 10

What are the major uses of the gross profit method?

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
01:30

Problem 11

Distinguish between gross profit as a percentage of cost and gross profit as a percentage of sales price. Convert the following gross profit percentages based on cost to gross profit percentages based on sales price: $25 \%$ and $33 \% \%$. Convert the following gross profit percentages based on sales price to gross profit percentages based on cost: $33 \% \%$ and $60 \%$

Victor Salazar
Victor Salazar
Numerade Educator
01:31

Problem 12

Adriana Co. with annual net sales of $\$ 5$ million maintains a markup of $25 \%$ based on cost. Adriana's expenses average $15 \%$ of net sales. What is Adriana's gross profit and net profit in dollars?

Stephen Russell
Stephen Russell
Numerade Educator
01:15

Problem 13

A fire destroys all of the merchandise of Assante Company on February 10,2011 . Presented below is information compiled up to the date of the fire.
What is the approximate inventory on February $10,2011 ?$

Vishal Parmar
Vishal Parmar
Numerade Educator
01:13

Problem 14

What conditions must exist for the retail inventory method to provide valid results?

Lourence Gonhovi
Lourence Gonhovi
Numerade Educator
02:46

Problem 15

The conventional retail inventory method yields results that are essentially the same as those yielded by the lowerof-cost-or-market method. Explain. Prepare an illustration of how the retail inventory method reduces inventory to market.

Jennifer Stoner
Jennifer Stoner
Numerade Educator
04:34

Problem 16

(a) Determine the ending inventory under the conventional retail method for the furniture department of Mayron Department Stores from the following data.
(b) If the results of a physical inventory indicated an inventory at retail of $\$ 295,000,$ what inferences would you draw?

Ahmad Reda
Ahmad Reda
Numerade Educator
00:57

Problem 17

Deere and Company reported inventory in its balance sheet as follows:
What additional disclosures might be necessary to present the inventory fairly?

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
01:02

Problem 18

Of what significance is inventory turnover to a retail store?

Jennifer Stoner
Jennifer Stoner
Numerade Educator
04:09

Problem 19

Where can authoritative iGAAP guidance related to inventories be found?

Tommy Nguyen
Tommy Nguyen
Numerade Educator
01:35

Problem 20

Briefly describe some of the similarities and differences between U.S. GAAP and iGAAP with respect to the accounting for inventories

Ameer Said
Ameer Said
Numerade Educator
01:07

Problem 21

LaTour Inc. is based in France and prepares its financial statements in accordance with iGAAP. In 2010 , it reported cost of goods sold of $€ 578$ million and average inventory of $€ 154$ million. Briefly discuss how analysis of LaTour's inventory turnover ratio (and comparisons to a company using U.S. GAAP) might be affected by differences in inventory accounting between iGAAP and U.S. GAAP.

Adriano Chikande
Adriano Chikande
Numerade Educator
05:47

Problem 22

Reed Pentak, a finance major, has been following globalization and made the following observation concerning accounting convergence: "I do not see many obstacles concerning development of a single accounting standard for inventories." Prepare a response to Reed to explain the main obstacle to achieving convergence in the area of inventory accounting.

Md.Daniyal Arshad
Md.Daniyal Arshad
Numerade Educator
02:29

Problem 23

What modifications to the conventional retail method are
necessary to approximate a LIFO retail flow?

Oluwadamilola Ameobi
Oluwadamilola Ameobi
Numerade Educator