Chapter 8 - Solution Manual

At the end of the accounting period an adjustment

Info icon This preview shows pages 23–24. Sign up to view the full content.

View Full Document Right Arrow Icon
At the end of the accounting period, an adjustment should be made for the estimated discounts that will be lost . Case 8-12 The solution to this case depends on the companies selected by the students. Requiring the students to turn in the information they download is a good method to use to check their solutions.
Image of page 23

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
167 Case 8-13 In IAS No . 2 , the IASB held that the objective of inventory reporting is to determine the proper amount of cost to recognize as an asset and carry forward until the related revenues are recognized. The board stated a preference for the specific identification method of inventory valuation when the items are interchangeable or are produced and segregated for specific projects. This method was viewed as inappropriate when large numbers of interchangeable items are present. In these cases the IASB stated a preference for either FIFO or weighted average methods; however, LIFO was an allowed alternative. Under the revised IAS No. 2 , the use of LIFO is no longer allowed. Additionally, under IAS N0. 2 , inventory is to be measured at the lower of cost or net realizable value (estimated selling price less estimated costs of completion and sale). Inventory write-downs are calculated using net realizable value on an item-by-item basis, but allows write-downs to occur by groups of similar products in special circumstances.. IAS No. 2 requires inventory to be written down to net realizable value (floor) on an item-by-item basis, but allows write-downs to occur by groups of similar products in special circumstances. This contrasts to U. S. GAAP under which write-downs are normally determined either on an item-by-item, group, or categorical basis. Also, IAS No 2 allows previous inventory write-down reversals to be recognized in the same period as the write-down; whereas, any inventory write-downs under U.S. GAAP cannot subsequently be reversed. As the FASB and the IASB move toward convergence of accounting standards, the LIFO issue will need to be resolved. Although the process of converging U.S. GAAP with international GAAP has made a great deal of progress, there are still many issues yet to be addressed, including the fate of the LIFO method. For over a decade, FASB and the IASB have had an ongoing agenda of projects, the objective of which is to move the process of convergence forward. For the period 2006–2008, numerous convergence-related issues were identified as either being on an active agenda or on a research agenda prior to being added to an active agenda. However, the issues of LIFO and inventory valuation in general are not included on the active or the research agenda of either board. Case 8-14 The solution to this case depends on the companies selected by the students. Requiring the students to turn in the information they download is a good method to use to check their solutions. Financial Analysis Case Answer will depend on company selected CHAPTER 9 Case 9-1 a. Under FASB ASC 958-605, the land would be recorded at fair value. The inflow is considered revenue. The land would be reported in the balance sheet at $100,000. A corresponding amount of revenue would appear in the income statement.
Image of page 24
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern