B under what circumstances should reeves company

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(b) Under what circumstances should Reeves Company include consigned goods in its inventory? PDF Watermark Remover DEMO : Purchase from to remove the watermark
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Brief Exercises 279 BRIEF EXERCISES BE6-1 Smart Company identifies the following items for possible inclusion in the taking of a physical inventory. Indicate whether each item should be included or excluded from the inven- tory taking. (a) Goods shipped on consignment by Smart to another company. (b) Goods in transit from a supplier shipped FOB destination. (c) Goods sold but being held for customer pickup. (d) Goods held on consignment from another company. 5. Jim’s Hat Shop received a shipment of hats for which it paid the wholesaler $2,970. The price of the hats was $3,000 but Jim’s was given a $30 cash discount and required to pay freight charges of $50. In addition, Jim’s paid $130 to cover the travel expenses of an employee who negotiated the purchase of the hats. What amount will Jim’s record for inventory? Why? 6. Explain the difference between the terms FOB shipping point and FOB destination. 7. David Shannon believes that the allocation of inventori- able costs should be based on the actual physical flow of the goods. Explain to David why this may be both im- practical and inappropriate. 8. What is a major advantage and a major disadvantage of the specific identification method of inventory costing? 9. “The selection of an inventory cost flow method is a de- cision made by accountants.” Do you agree? Explain. Once a method has been selected, what accounting re- quirement applies? 10. Which assumed inventory cost flow method: (a) usually parallels the actual physical flow of mer- chandise? (b) assumes that goods available for sale during an ac- counting period are identical? (c) assumes that the latest units purchased are the first to be sold? 11. In a period of rising prices, the inventory reported in Plato Company’s balance sheet is close to the current cost of the inventory. Cecil Company’s inventory is consider- ably below its current cost. Identify the inventory cost flow method being used by each company. Which com- pany has probably been reporting the higher gross profit? 12. Casey Company has been using the FIFO cost flow method during a prolonged period of rising prices. During the same time period, Casey has been paying out all of its net income as dividends. What adverse effects may result from this policy? 13. Peter Lunde is studying for the next accounting mid-term examination.What should Peter know about (a) departing from the cost basis of accounting for inventories and (b) the meaning of “market” in the lower-of-cost-or- market method? 14. Garitson Music Center has 5 CD players on hand at the balance sheet date. Each cost $400. The current replace- ment cost is $380 per unit. Under the lower-of-cost-or- market basis of accounting for inventories, what value should be reported for the CD players on the balance sheet? Why?
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