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Chapter 8: Valuation of Inventories: A Cost-Basis Approach

Intermediate Accounting (Kieso)
Pages: 386 - 441

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83 Questions for Chapter 8: Valuation of Inventories: A Cost-Basis Approach

  1. How might a company obtain a price index in order to apply dollar-value LIFO?

    Found on Page 421
  2. Describe the LIFO double-extension method. Using the following information, compute the index at December 31, 2017, applying the double-extension method to a LIFO pool consisting of 25,500 units of product A and 10,350 units of product B. The base-year cost of product A is $10.20 and of product B is $37.00. The price at December 31, 2017, for product A is $21.00 and for product B is $45.60. (Round to two decimal places.)

    Found on Page 421
  3. What is the dollar-value method of LIFO inventory valuation? What advantage does the dollar-value method have over the specific goods approach of LIFO inventory valuation? Why will the traditional LIFO inventory costing method and the dollar-value LIFO inventory costing method produce different inventory valuations if the composition of the inventory base changes?

    Found on Page 421
  4. Explain the following terms.

    Found on Page 421
  5. On December 31, 2016, the inventory of Powhattan Company amounts to $800,000. During 2017, the company decides to use the dollar-value LIFO method of costing inventories. On December 31, 2017, the inventory is $1,053,000 at December 31, 2017, prices. Using the December 31, 2016, price level of 100 and the December 31, 2017, price level of 108, compute the inventory value at December 31, 2017, under the dollar-value LIFO method.

    Found on Page 422
  6. The following independent situations relate to inventory accounting.

    Found on Page 430
  7. At the balance sheet date, Clarkson Company held title to goods in transit amounting to $214,000. This amount was omitted from the purchases figure for the year and also from the ending inventory. What is the effect of this omission on the net income for the year as calculated when the books are closed? What is the effect on the company’s financial position as shown in its balance sheet? Is materiality a factor in determining whether an adjustment for this item should be made?

    Found on Page 422
  8. Dimitri Company, a manufacturer of small tools, provided the following information from its accounting records for the year ended December 31, 2017.

    Found on Page 431
  9. Some of the transactions of Torres Company during August are listed below. Torres uses the periodic inventory method.

    Found on Page 432
  10. Ehlo Company is a multiproduct firm. Presented below is information concerning one of its products, the Hawkeye.

    Found on Page 433

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