varies among LIFO‚ FIFO‚ and average cost. What is the value of inventories that Dow Chemical values at LIFO basis as of December 31‚ 2012? .29 * 8476 million= 2485 million 2. Suppose that Dow Chemical had used first-in‚ first-out (FIFO) as a cost flow assumption for all of their Inventories. Would the book value of Inventories at December 31‚ 2012 be higher than‚ lower than‚ or the same as the amount currently recorded? If different‚ by how much? Inventories would be higher with FIFO. Would be
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their competitors or nature of the industry they are in. John Deere uses LIFE as their cost flow assumption. d) The balance sheets of the two companies would differ in the LIFO reserve John Deere must have on the balance sheet. For John Deere‚ they utilize LIFO‚ which “stores” the value of the product in inventory more than FIFO. John Deere can keep their inventory stocked with lower priced goods on the balance sheet‚ when in reality they are moving all the same inventory. If prices are decreasing
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Inventory Valuation 1 Lewis Corporation Case: 6-2 Page: 173 2 Lewis Corporation Traditionally used inventory valuation method: FIFO Uses periodic inventory system 3 Inventory Transaction 2005-2007 No. of Cartons Price per Carton 2005 2006 2007 2005 2006 2007 Beginning balance 1840 1020 1040 $20.00 Purchases 600 700 1000 $20.25 $21.50 $22.50 800 700 700 $21.00 $21.50 $22.75 400 700 700 $21.25 $22.00 $23.00 200 1000 700 $21.50 $22.25 $23.50 Sales 2820 3080 2950 $34
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IV D. I‚ II and III 5. For Control Furniture Co.‚ LIFO Reserve in Year 2006 $91 million LIFO Reserve in Year 2005$82 million Tax Rate is 35%. To restate Year 2006 LIFO inventories to a FIFO basis‚ we use the following analytical entry: A. Option A B. Option B C. Option C D. Option D The following information can be found in ABC Co.’s financial statements. Assume a tax rate of 35%. Inventories valued using the LIFO method represented approximately 80% of consolidated inventories
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Chapter 7 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
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using FIFO versus LIFO as the cost flow assumption in the accountant’s process of inventory valuation for financial statement reporting to a company’s external stakeholders. FIFO AND LIFO ANALYSIS As shown in the exhibit‚ because the price of LG TV was decreasing‚ Samuel’s Electronics would record less cost of good sold and consequently have greater ending inventory value utilizing LIFO inventory system. The company would generate higher net income and increase the earnings. Also‚ LIFO could reflect
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University of Phoenix Material Accounting Memo interoffice memo to: Accounting Team mate from: Andrew Accountant subject: LIFO FIFO explanation date: 6/10/2015 Team-mate We need to get together later this week—boss has requested we give her an overview of Last In/First Out (LIFO) versus First In/First Out (FIFO) as it might apply to our company. She needs the background info to present to our president and the board late this month. This is to help management make the decision of which inventory
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6-2 Lewis Corporation* Lewis Corporation had traditionally used the FIFO method of inventory valuation. You are given the information shown in exhibit 1 on transactions during the year affecting Lewis’s inventory account. (The purchases are in sequence during the year. The company uses a periodic inventory method). Exhibit 1 Inventory Transactions 2000-2002--------------------------------------------------- 2000 Beginning Balance 1
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1(a) Paragon Electronics‚ INC. LIFO Purchases By Paragon Sold to Ending Inventory Cost of goods sold Year Units Unit cost($) Aero Inc Units Unit Cost($) Total($) Unit Unit Cost($) Total($) 1986 100 700 80 20 700 14‚000 80 700 56‚000 1987 100 800 110 10 700 7‚000 100 10 800 700 87‚000 1988 100 850 92 10 8 700 850 7‚000 6‚800 92 850 78‚200 1989 100 750 104 10 4 700 850 7‚000 3‚400 100 4 750 850 78‚400 1990 100 650 94 10 4
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example of valuation methods of accounting principles that evaluate the value of inventory are the FIFO and LIFO method. There are several differences between FIFO and LIFO approach‚ so it can be two different balances for the same inventory depending on the valuation method. Therefore‚ a financial statement can be affected dramatically by switching form FIFO to LIFO. When switching from FIFO to LIFO‚ an entity needs to consider whether it is essential to restate its financial data for previous years
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