Chapter 07 Reporting and Interpreting Cost of Goods Sold and Inventory ANSWERS TO QUESTIONS 1. Inventory often is one of the largest amounts listed under assets on the balance sheet which means that it represents a significant amount of the resources available to the business. The inventory may be excessive in amount, which is a needless waste of resources; alternatively it may be too low, which may result in lost sales. Therefore, for internal users inventory control is very important.
Words: 10953 - Pages: 44
Concept AICPA Functional: Reporting 2) Financial accounting prepares reports for internal purposes, whereas managerial accounting provides information to external stakeholders. Answer: FALSE Diff: 1 LO: 18-1 AACSB: Concept AICPA Functional: Reporting 3) The IMA standards of ethical practice require managerial accountants to maintain their professional competence. Answer: TRUE Diff: 1 LO: 18-1 AACSB: Ethical Understanding AICPA Functional: Reporting 4) The accountant for
Words: 12523 - Pages: 51
Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 2. A flour manufacturer is more likely to use process costing than job-order costing whereas a manufacturer of customized leather jackets is more likely to use job-order costing than process costing. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 3. Normally a job cost sheet is not prepared for a job until after the job has been completed. Ans:
Words: 23821 - Pages: 96
inventory reporting methods used. First-In, First-Out (FIFO), Last-In, First-Out (LIFO,) and weighted average methods each have their own implications during periods of inflation and deflation. This paper is designed to analyze and discuss the Generally Accepted Accounting Practices (GAAP) and ethical implications of each reporting method in a hypothetical company. For this paper, these discussions will be from the viewpoint of a manager. In this paper, the manager will select an inventory reporting method
Words: 788 - Pages: 4
principles (GAAP) are the measurements and disclosure rules used to develop the information in financial statements (Libby, Libby, Short. pg. 16). When reporting inventory, there are generally four inventory reporting methods used; Specific identification method, first-in, first-out method (FIFO), last-in, first out method (LIFO), and average cost method. Each method is in conformity with GAAP and the law. Also each method has their own implications during periods of inflation and deflation. They
Words: 724 - Pages: 3
realizable value and at the lower of cost. They believe that the result will cause a reporting entity to not be required to consider replacement costs. There will not be additional disclosures required in the periods after the amendments. The amendments will be applied in the annual reporting periods after December 15th, 2016 with interim reporting periods starting after December 15th, 2017. If LIFO is used for tax purposes, it must also be used for financial reporting of a company. This can cause
Words: 1222 - Pages: 5
Write down the definition of ‘Inventory’ under IAS-2. What physical materials does ‘Inventory’ include? 2. According to IAS-2, what are the components of non-components of Inventory Cost? 3. Distinguish between ‘Perpetual’ and ‘Periodic’ system for recording Inventory? Show proper examples. 4. What are the Cost Flow Formulas/Assumptions allowed in IAS-2 for maintaining Inventory? Show examples. Which one should be used in what situation? 5. Explain LIFO? Why LIFO is not permitted in IAS-2
Words: 1781 - Pages: 8
assess those risks and uncertainties. SOP 94-6 focuses primarily on disclosures about risks and uncertainties that could significantly impact the amounts reported in the financial statements in the near term or the near-term functioning of the reporting entity. These risks and uncertainties may result from, among other matters, the nature of the entity’s operations, and the use of estimates in the financial statements, and significant uncertainties in the entity’s operations. Financial Implications
Words: 750 - Pages: 3
Absorption Costing Absorption costing is a costing system in which the direct labor, direct materials, and fixed and variable manufacturing overhead costs are traced to every finished product. Thus, in the absorption costing system, all costs are product costs regardless of their classification of variable or fixed. Because of its characteristic of no cost discrimination, absorption costing is also known as full costing or as full absorption method (¨Absorption¨ 1). The absorption costing is the only
Words: 4183 - Pages: 17
requirement or allowing it for financial reporting and tax purposes by conforming IFRS to US standards in some way my response is “Eliminate LIFO”. So, Last-in-first-out (LIFO) is an inventory accounting technique which allocates the most recent inventory prices to cost of goods sold and the oldest inventory prices to items remaining in the inventory. In a period of increasing prices, this assumption assigns the recent and higher prices to cost of goods sold and the older lower prices to inventory
Words: 512 - Pages: 3
