Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 9: Q8Q (page 442)

Question:What factors might call for inventory valuation at sales prices (net realizable value or market price)?

Short Answer

Expert verified

Answer

The factors include are as follows:

  • Controlled market with the given price
  • Absence of significant cost of disposals
  • Immediate delivery of the product

Step by step solution

01

Step-by-step-solutionStep1:

In the situation when the inventories belong to the controlled market and do not have costs of disposal, then these inventories are reported at the selling price. For example: In the case of mining companies, resources are reported at the selling price as they belong to a controlled market, and also there is no cost of disposal.

02

Step 2:

In the situation, when the inventories can be delivered immediately at the time of contract or agreement, then it is recorded at the selling price. For Example: In the case of harvested crops or the animals which are held for sale, can be delivered immediately to the buyer, hence in this case inventories are reported at the selling price.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Question:In some instances, accounting principles require a departure from valuing inventories at cost alone. Determine the proper unit inventory price in the following cases using LCNRV. Cases 1 2 3 4 5 Cost \(15.90 \)16.10 \(15.90 \)15.90 $15.90 Sales value 14.80 19.20 15.20 10.40 17.80 Estimated cost to complete 1.50 1.90 1.65 .80 1.00 Estimated cost to sell .50 .70 .55 .40 .60

Gross Profit Method) Each of the following gross profit percentages is expressed in terms of cost. 1. 20%. 3. 331 /3%. 2. 25%. 4. 50%. Instructions Indicate the gross profit percentage in terms of sales for each of the above.

All of the following are key differences between GAAP and IFRS with respect to accounting for inventories except the: (a) definition of the lower-of-cost-or-market test for inventory valuation differs between GAAP and IFRS. (b) average-cost method is prohibited under IFRS. (c) inventory basis determination for write-downs differs between GAAP and IFRS. (d) guidelines are more principles-based under IFRS than they are under GAAP.

In some instances, accounting principles require a departure from valuing inventories at cost alone. Determine the proper unit inventory price in the following cases. Cases 1 2 3 4 5 Cost \(15.90 \)16.10 \(15.90 \)15.90 $15.90 Sales price 14.80 19.20 15.20 10.40 17.80 Estimated cost to complete 1.50 1.90 1.65 .80 1.00 Estimated cost to sell .50 .70 .55 .40 .60

During 2017, Pretenders Furniture Company purchases a carload of wicker chairs. The manufacturer sells the chairs to Pretenders for a lump sum of \(59,850 because it is discontinuing manufacturing operations and wishes to dispose of its entire stock. Three types of chairs are included in the carload. The three types and the estimated selling price for each are listed below. Type No. of Chairs Estimated Selling Price Each Lounge chairs 400 \)90 Armchairs 300 80 Straight chairs 700 50 During 2017, Pretenders sells 200 lounge chairs, 100 armchairs, and 120 straight chairs. Instructions What is the amount of gross profit realized during 2017? What is the amount of inventory of unsold straight chairs on December 31, 2017?
See all solutions

Recommended explanations on Business Studies Textbooks

Corporate Finance

Read Explanation

Strategic Analysis

Read Explanation

Influences On Business

Read Explanation

Intermediate Accounting

Read Explanation

Strategic Direction

Read Explanation

Organizational Communication

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free