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Exam 9: Property, Plant, and Equipment and Intangible Assets: Acquisition and Disposition

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Question 21

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Green Acres Co. has elected to use the dollar-value LIFO retail method to value its inventory. The following data has been accumulated from the accounting records: Pertinent retail price indexes: Required: Estimate the cost of ending inventory for December 31, 2013.

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Question 22

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The average cost-to-retail percentage is:

A) 74.5%.
B) 55.6%.
C) 57.4%.
D) 58.7%.

E) All of the above
F) C) and D)

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Question 23

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The following disclosure note appeared in the 2013 annual report to shareholders of Upton Systems Inc. Inventories are stated at the lower of cost or market. Cost is computed using standard cost, which approximates actual cost, on a first-in, first-out basis. The Company provides inventory allowances based on excess and obsolete inventories. Another disclosure note in the annual report stated: The Company recorded a provision for inventory, including purchase commitments, totaling $1.40 billion during fiscal 2013, which included an additional excess inventory charge as previously discussed. This additional excess inventory charge was due to a sudden and significant decrease in demand for the Company's products and was calculated in accordance with the Company's accounting policy. A skeptic may conclude that Upton's policy and practices threaten earnings quality. Discuss how it may do so.

Murdock Industries uses a periodic inventory system and the LIFO retail method to estimate its ending inventories. The following data has been summarized for December 31, 2013: Required: Estimate the LIFO cost of ending inventory. Assume stable retail prices during the period.

Manila Bread Company uses the average cost retail method to estimate its ending inventories. The following data has been summarized for the year 2013: Required: Estimate the ending inventory as of December 31, 2013.

Under the LIFO retail method, the denominator in the cost-to-retail percentage includes:

Briefly explain how a material adjustment to inventory due to application of the lower-of-cost-or-market rule should be reported in the financial statements.

Orlando Company has used the average cost method for inventory valuation since it began business in 2009, but has elected to change to the FIFO method starting in 2012. Year-end inventory valuations under each method are shown below: Required: How would Orlando reflect the change in accounting principle in its financial statements (ignore income taxes)?

A change from LIFO to any other inventory method is accounted for retrospectively.

Determine the balance sheet inventory carrying value for Products A, B, and C assuming that Memphis Wholesale Market prepares its financial statements according to International Financial Reporting Standards.

If market price on purchase date declines from year-end price, the purchase is recorded at market price. March 4, 2014

Required: Determine the balance sheet inventory carrying value assuming the LCM rule is applied to individual types of feeds.

New York Sales Inc. uses the conventional retail method to estimate its ending inventories. The following data has been summarized for December 31, 2013: Required: Compute the cost-to-retail percentage used by New York Sales Inc.

Portman Inc. uses the conventional retail inventory method. Expressed in millions of dollars, information about Portman's 2013 inventory account is expressed in the table below: What is the value of Portman's inventory at 12/31/13?

Under International Financial Reporting Standards, inventory is valued at the lower of cost and:

Under the LIFO retail method, the current period cost-to-retail percentage includes both net markdowns and net markups.

In applying the LCM rule, the inventory of rehab supplies would be valued at:

The first step, when using dollar-value LIFO retail method for inventory, is to:

Estimated ending inventory at cost is:

Cornhusker Can Co. uses the conventional retail method to estimate ending inventories. The following data has been summarized for year ended December 31, 2013: Required: Estimate the cost of ending inventory applying the conventional retail method. Assume that sales are recorded net of employee discounts.