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Chapter 9: Q1ISTQ (page 499)

All of the following are key similarities between GAAP and IFRS with respect to accounting for inventories except: (a) costs to include in inventories are similar. (b) LIFO cost flow assumption where appropriate is used by both sets of standards. (c) fair value valuation of inventories is prohibited by both sets of standards. (d) guidelines on ownership of goods are similar

Short Answer

Expert verified

The correct option is 鈥渂.鈥�

Step by step solution

01

LIFO cost flow assumption

(b) LIFO cost assumption is permitted by the GAAP but is prohibited under IFRS.

02

Explanation of wrong options

(a) Under GAAP and IFRS, the costs included in the inventories are the same.

(c) Both GAAP and IFRS prohibit the fair value valuation method.

(d) Guidelines of ownership are similar under both.

Thus, the correct option is the second one.

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Most popular questions from this chapter

Remmers Company manufactures desks. Most of the company鈥檚 desks are standard models and are sold on the basis of catalog prices. At December 31, 2017, the following finished desks (10 desks in each category) appear in the company鈥檚 inventory. Finished Desks A B C D 2017 catalog selling price \(45 \)48 \(90 \)105 FIFO cost per inventory list 12/31/17 47 45 83 96 Estimated cost to complete and sell 5 11 26 20 2018 catalog selling price 50 54 90 120 The 2017 catalog was in effect through November 2017, and the 2018 catalog is effective as of December 1; catalog prices are net of the usual discounts.

Question:What are the major uses of the gross profit method?

Presented below is information related to Ricky Henderson Company. Cost Retail Beginning inventory \( 200,000 \) 280,000 Purchases 1,375,000 2,140,000 Markups 95,000 Markup cancellations 15,000 Markdowns 35,000 Markdown cancellations 5,000 Sales revenue 2,200,000 Instructions Compute the inventory by the conventional retail inventory method.

Briefly describe some of the similarities and differences between GAAP and IFRS with respect to the accounting for inventories

Presented below is information related to Rembrandt Inc.鈥檚 inventory, assuming Rembrandt uses lower-of-LIFO cost-or-market. (per unit) Skis Boots Parkas Historical cost \(190.00 \)106.00 $53.00 Selling price 212.00 145.00 73.75 Cost to distribute 19.00 8.00 2.50 Current replacement cost 203.00 105.00 51.00 Normal profit margin 32.00 29.00 21.25 Determine the following: (a) the two limits to market value (i.e., the ceiling and the floor) that should be used in the lower-of cost-or-market computation for skis, (b) the cost amount that should be used in the lower-of-cost-or-market comparison of boots, and (c) the market amount that should be used to value parkas on the basis of the lower-of-cost-or-market.
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