Assume that Darcy Industries had the following inventory values. Inventory cost (on December 31, 2017) $1,500 Inventory market (on December 31, 2017) $1,350 Inventory net realizable value (on December 31, 2017) $1,320 Under IFRS, what is the inventory carrying value on December 31, 2017? (a) $1,500. (b) $1,570. (c) $1,560. (d) $1,320
The correct option is “d.”
(d) The inventory cost is $1,500, and the net realizable value is $1,320. Hence inventories will be reported at the net realizable value, as it is the lowest compared to the inventory cost.
(a) Inventories carrying value will not be equal to the cost, as market value and NRV is below the original cost.
(b) $1,570 incorrectly estimated.
(c) $1,560 incorrectly estimated.
Thus, the correct option is $1,320.
(Dollar-Value LIFO Retail) You assemble the following information for Seneca Department Store, which computes its inventory under the dollar-value LIFO method. Cost Retail Inventory on January 1, 2017 $216,000 $300,000 Purchases 364,800 480,000 Increase in price level for year 9% Instructions Compute the cost of the inventory on December 31, 2017, assuming that the inventory at retail is (a) $294,300 and (b) $365,150.
Barrick Gold Corporation, with headquarters in Toronto, Canada, is the world’s most profitable and largest gold mining company outside South Africa. Part of the key to Barrick’s success has been due to its ability to maintain cash flow while improving production and increasing its reserves of gold-containing property. In the most recent year, Barrick achieved record growth in cash flow, production, and reserves. The company maintains an aggressive policy of developing previously identified target areas that have the possibility of a large amount of gold ore, and that have not been previously developed. Barrick limits the riskiness of this development by choosing only properties that are located in politically stable regions, and by the company’s use of internally generated funds, rather than debt, to finance growth. Using Your Judgment 491 492 Chapter 9 Inventories: Additional Valuation Issues Barrick’s inventories are as follows. Barrick Gold Corporation Inventories (in millions, US dollars) Current Gold in process $133 Mine operating supplies 82 $215 Non-current (included in Other assets) Ore in stockpiles $65 Instructions (a) Why do you think that there are no finished goods inventories? Why do you think the raw material, ore in stockpiles, is considered to be a non-current asset? (b) Consider that Barrick has no finished goods inventories. What journal entries are made to record a sale? (c) Suppose that gold bullion that cost $1.8 million to produce was sold for $2.4 million. The journal entry was made to record the sale, but no entry was made to remove the gold from the gold in process inventory. How would this error affect the following? Balance Sheet Income Statement Inventory ? Cost of goods sold ? Retained earnings ? Net income ? Accounts payable ? Working capital ? Current ratio ?
The records of Ellen’s Boutique report the following data for the month of April. Sales revenue $99,000 Purchases (at cost) $48,000 Sales returns 2,000 Purchases (at sales price) 88,000 Markups 10,000 Purchase returns (at cost) 2,000 Markup cancellations 1,500 Purchase returns (at sales price) 3,000 Markdowns 9,300 Beginning inventory (at cost) 30,000 Markdown cancellations 2,800 Beginning inventory (at sales price) 46,500 Freight on purchases 2,400 Instructions Compute the ending inventory by the conventional retail inventory method
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