Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 8: Question 4Q (page 421)

Mishima, Inc. indicated in a recent annual report that approximately $19 million of merchandise was received on consignment. Should Mishima, Inc. report this amount on its balance sheet? Explain.

Short Answer

Expert verified

No, Mishima Inc. cannot report the consigned merchandise into its balance sheet as it has no control over it.

Step by step solution

01

Consignment sale

A consignment sale is a type of sale agreement in which the title and ownership of the merchandise remain with the seller (consignor). The consignee only takes responsibility for selling them.

02

Reporting in balance sheet

In the given case, Mishima Inc. is a consignee who has taken the responsibility of selling the goods. But the title and the ownership of merchandise do not belong to Mishima Inc.

Thus Mishima Inc. cannot report merchandise amounting to $19 million on its balance sheet.

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 January 2017, Susquehanna Inc. requested and secured permission from the commissioner of the Internal Revenue Service to compute inventories under the last-in, first-out (LIFO) method and elected to determine inventory cost under the dollar-value LIFO method. Susquehanna Inc. satisfied the commissioner that cost could be accurately determined by use of an index number computed from a representative sample selected from the company’s single inventory pool.

Instructions

(a) Why should inventories be included in (1) a balance sheet and (2) the computation of net income?

(b) The Internal Revenue Code allows some accountable events to be considered differently for income tax reporting purposes and financial accounting purposes, while other accountable events must be reported the same for both purposes. Discuss why it might be desirable to report some accountable events differently for financial accounting purposes than for income tax reporting purposes.

(c) Discuss the ways and conditions under which the FIFO and LIFO inventory costing methods produce different inventory valuations. Do not discuss procedures for computing inventory cost.

Shania Twain Company was formed on December 1, 2016. The following information is available from Twain’s inventory records for Product BAP.

Units Unit Cost

January 1, 2017 (beginning inventory) 600 $ 8.00

Purchases:

January 5, 2017 1,200 9.00

January 25, 2017 1,300 10.00

February 16, 2017 800 11.00

March 26, 2017 600 12.00

A physical inventory on March 31, 2017, shows 1,600 units on hand.

Instructions

Prepare schedules to compute the ending inventory at March 31, 2017, under each of the following inventory methods.

(a) FIFO (b) LIFO. (c) Weighted-average (round unit costs to two decimal places).

The net income per books of Linda Patrick Company was determined without knowledge of the errors indicated.

Net Income Error in Ending

Year per Books Inventory

2012 \(50,000 Overstated \) 3,000

2013 52,000 Overstated 9,000

2014 54,000 Understated 11,000

2015 56,000 No error

2016 58,000 Understated 2,000

2017 60,000 Overstated 8,000

Instructions

Prepare a worksheet to show the adjusted net income figure for each of the 6 years after taking into account the inventoryerrors.

Question:Two or more items are omitted in each of the following tabulations of income statement data. Fill in the amounts that are missing.

2016 2017 2018

Sales revenue \(290,000 \) ?$410,000

Sales returns and allowances 11,000 13,000 ?

Net sales ? 347,000 ?

Beginning inventory 20,000 32,000 ?

Ending inventory ? ? ?

Purchases ? 260,000 298,000

Purchase returns and allowances 5,000 8,000 10,000

Freight-in 8,000 9,000 12,000

Cost of goods sold 233,000 ? 293,000

Gross profi t on sales 46,000 91,000 97,000

Specific identification is sometimes said to be the ideal method of assigning a cost to inventory and to the cost of goods sold. Briefly indicate the arguments for and againstthis method of inventory valuation.
See all solutions

Recommended explanations on Business Studies Textbooks

Business Case Studies

Read Explanation

Strategic Direction

Read Explanation

Nature of Business

Read Explanation

Managers

Read Explanation

Change Management

Read Explanation

Business Development

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