Ans na so 1 bloom k difficulty easy min 5 aacsb

This preview shows page 78 - 80 out of 83 pages.

We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
South-Western Federal Taxation 2020: Individual Income Taxes
The document you are viewing contains questions related to this textbook.
Chapter 18 / Exercise 38
South-Western Federal Taxation 2020: Individual Income Taxes
Young/Nellen/Hoffman
Expert Verified
Ans: N/A, SO: 1, Bloom: K, Difficulty: Easy, Min: 5, AACSB: Communications, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Communications, IMA: Business EconomicsSolution 236When a periodic inventory system is used, the Inventory account remains the same throughout the period. Separate accounts are used to record the transactions. Cost of goods sold is determined by the following formula:Beginning inventory + Net purchases - Ending inventoryThe determination of ending inventory is made by a physical count. When a perpetual inventory system is used, the purchase and sale of goods is recorded directly in the Inventory account, which eliminates the need for separate purchases accounts. Cost of goods sold is recognized for each sale by debiting the account and crediting Inventory. At the end of the period, the ending account balance in inventory represents the amount of inventory that should be on hand. However, a company should conduct a physical inventory count, at least once a year, because differences could result from spoilage, theft, or errors.S-A E 237What is the primary basis of accounting for inventories? What is the major objective in accounting for inventories?Ans: N/A, SO: 2, Bloom: K, Difficulty: Easy, Min: 5, AACSB: Communications, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Communications, IMA: Business EconomicsSolution 237The primary basis of accounting for inventories is cost in accordance with the cost principle. The major objective of accounting for inventories is the proper determination of net income in accordance with the matching principle.S-A E 238A survey of major U.S. companies revealed that 77% of those companies used either LIFO or FIFO cost flow methods, while 19% used average cost, and only 4% used other methods.Requirement6-78
We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
South-Western Federal Taxation 2020: Individual Income Taxes
The document you are viewing contains questions related to this textbook.
Chapter 18 / Exercise 38
South-Western Federal Taxation 2020: Individual Income Taxes
Young/Nellen/Hoffman
Expert Verified
Reporting and Analyzing InventoryProvide brief, yet concise responses to the following questions.a.Why are LIFO and FIFO so popular?b.Since computers and inventory management software are readily available, why aren’t more companies using specific identification?Ans: N/A, SO: 3, Bloom: C, Difficulty: Easy, Min: 5, AACSB: Communications, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Communications, IMA: Business EconomicsSolution 238a.FIFO and LIFO are based on cost flow assumptions that may be unrelated to the physical flow of goods. The reasons for using one of these methods involve the effects on the income statement, balance sheet, and taxes that the company must pay.In periods of rising prices (inflation), LIFO provides for a lower net income, thus resulting in a lower tax liability. LIFO reflects the most realistic cost of goods sold (the most recent or highest costs), however the cost of inventory on the balance sheet is distorted because it consists of the earliest or lowest costs.

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture