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Exam 8: Inventories: Measurement

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Question 1

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The following information is taken from the accounting records of Rapid Runner Inc. for the year 2016. Missing information has been left blank. -Required: Compute the missing amounts.

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Question 2

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LIFO liquidation profits occur when inventory quantity declines and costs are rising.

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Question 3

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A company that prepares its financial statements according to International Financial Reporting Standards can use each of the following inventory valuation methods except:

On January 1,2015,ECT Co.adopted the dollar-value LIFO method for its one inventory pool.The pool's value on this date was $600 million.The 2015 and 2016 ending inventory valued at year-end costs were $702 million and $840 million,respectively.The appropriate cost indexes are 1.08 for 2015 and 1.20 for 2016. Required: Calculate the inventory balance that ECT Co.would report on its year-end balance sheets for 2015 and 2016,using the dollar-value LIFO method.

The following information is taken from the accounting records of Rapid Runner Inc. for the year 2016. Missing information has been left blank -Required: Compute the missing amounts.

On January 1,2015,RAY Co.adopted the dollar-value LIFO method for its one inventory pool.The pool's value on this date was $300 million.The 12/31/15 inventory valued at year-end costs was $385 million.The 12/31/15 inventory,using dollar-value LIFO was $355 million. Required: Calculate 2015 cost index for RAY's inventory.

In a perpetual inventory system,the cost of purchases is debited to:

The main difference between perpetual and periodic inventory systems is the timing of the allocation of costs between inventory and cost of goods sold.

What inventory balance should Badger report on its 12/31/16 balance sheet?

Carmen Inc. ,producer of high-tech boating equipment,disclosed the following information in its 2016 annual report to shareholders: Inventories are valued at the lower of cost or net realizable value with cost determined by the last-in,first-out (LIFO)method for inventories. Inventories at May 31 were as follows: How does the supplemental LIFO information indicating what the value of ending inventory would have been if measured using FIFO improve the quality of financial reporting by Carmen?

Ending inventory using the LIFO method is:

During periods of falling prices,LIFO ending inventory will be less than FIFO ending inventory.

Chavez Inc.adopted dollar-value LIFO on January 1,2016,when the inventory value was $850,000.The December 31,2016,ending inventory at year-end cost was $950,000 and the cost index for the year is 1.08. Required: Compute the dollar-value LIFO inventory valuation (rounded)for the December 31,2016,inventory.

The ending inventory assuming LIFO and a periodic inventory system is:

During 2016,WW Inc.reduced its LIFO eligible inventory quantities due to a problem with its major supplier.The effect of this liquidation was to increase its cost of goods sold by approximately $50 million.WW has a 40% income tax rate.If WW had not experienced these supplier problems and the resulting liquidation:

Robertson Corporation's inventory balance was $22,000 at the beginning of the year and $20,000 at the end.The inventory turnover ratio for the year was 6.0 and the gross profit ratio 40%.What were net sales for the year?

During periods when costs are rising and inventory quantities are stable,cost of goods sold will be:

Ending inventory assuming LIFO in a perpetual inventory system would be:

Costs and prices regularly fall every year in the microcomputer industry.Briefly indicate your recommendation and rationale for an inventory method for a firm about to enter this industry.

The following information comes from the 2013 Occidental Petroleum Corporation annual report to shareholders: NOTE 4 INVENTORIES Net carrying values of inventories valued under the LIFO method were approximately $205 million and $185 million at December 31,2013 and 2012,respectively.Inventories consisted of the following: ($ in millions) The LIFO reserve indicates that inventories would have been $91 million and 101 million higher at the end of 2013 and 2012,respectively,if Occidental Petroleum had used FIFO to value its entire inventory. Required: If Occidental Petroleum had used FIFO to value its entire inventory how would its 2013 pre-tax income be affected?