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Chapter 9: Q4ISTQ (page 499)

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

Short Answer

Expert verified

The correct option is “d.”

Step by step solution

01

Estimation of inventory value

(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.

02

Explanation of wrong options

(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.

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Most popular questions from this chapter

Use the information for Boyne Inc. from BE9-10. Compute ending inventory at cost using the LIFO retail method.

All of the following are key similarities between GAAP and IFRS with respect to accounting for inventories except: (a) costs to include in inventories are similar. (b) LIFO cost flow assumption where appropriate is used by both sets of standards. (c) fair value valuation of inventories is prohibited by both sets of standards. (d) guidelines on ownership of goods are similar

Gheorghe Moresan Lumber Company handles three principal lines of merchandise with these varying rates of gross profit on cost. Lumber 25% Millwork 30% Hardware and fittings 40% On August 18, a fire destroyed the office, lumber shed, and a considerable portion of the lumber stacked in the yard. To file a report of loss for insurance purposes, the company must know what the inventories were immediately preceding the fire. No detail or perpetual inventory records of any kind were maintained. The only pertinent information you are able to obtain are the following facts from the general ledger, which was kept in a fireproof vault and thus escaped destruction. Lumber Millwork Hardware Inventory, Jan. 1, 2017 \( 250,000 \) 90,000 $ 45,000 Purchases to Aug. 18, 2017 1,500,000 375,000 160,000 Sales revenue to Aug. 18, 2017 2,080,000 533,000 210,000 Exercises 479 480 Chapter 9 Inventories: Additional Valuation Issues Instructions Submit your estimate of the inventory amounts immediately preceding the fire.

Question:What are the major uses of the gross profit method?

Kumar Inc. uses LIFO inventory costing. At January 1, 2017, inventory was \(214,000 at both cost and market value. At December 31, 2017, the inventory was \)286,000 at cost and $265,000 at market value. Prepare the necessary December 31 entry under (a) the cost-of-goods-sold method and (b) the loss method.
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