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Chapter 9: Question 18Q (page 474)

Deere and Company reported inventory in its balance sheet as follows. Inventories $1,999,100,000 What additional disclosures might be necessary to present the inventory fairly?

Short Answer

Expert verified

Additional disclosures such as inventory composition, arrangement of inventory financing, and methods used to value the inventory should be disclosed.

Step by step solution

01

Definition of inventories

Inventories are the items held at the end of the year by the business, which are unsold by the business.

02

Additional reporting related to inventories

The company is required to report the composition of inventories such as raw material, finished goods, work in process inventories, etc., in the balance sheet or in the notes to the financial statements.

Inventories purchased by financing arrangements such as related party transactions, firm purchase commitments, and loans secured by inventories should be reported in the disclosures to the financial statements.

Methods used to value the inventory, such as LIFO, FFO, average cost method, etc., should be properly disclosed in the financial statements as disclosure.

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Most popular questions from this chapter

What conditions must exist for the retail inventory method to provide valid results?

Dover Company began operations in 2017 and determined its ending inventory at cost and at LCNRV at December 31, 2017, and December 31, 2018. This information is presented below. Cost Net Realizable Value 12/31/17 \(346,000 \)322,000 12/31/18 410,000 390,000 Instructions (a) Prepare the journal entries required at December 31, 2017, and December 31, 2018, assuming inventory is recorded at LCNRV and a perpetual inventory system using the cost-of-goods-sold method. (b) Prepare journal entries required at December 31, 2017, and December 31, 2018, assuming inventory is recorded at LCNRV and a perpetual system using the loss method. (c) Which of the two methods above provides the higher net income in each year?

Question:Where there is evidence that the utility of inventory goods, as part of their disposal in the ordinary course of business, will be less than cost, what is the proper accounting treatment?

Keller Company began operations on January 1, 2016, adopting the conventional retail inventory system. None of the company鈥檚 merchandise was marked down in 2016 and, because there was no beginning inventory, its ending inventory for 2016 of \(38,100 would have been the same under either the conventional retail system or the LIFO retail system. On December 31, 2017, the store management considers adopting the LIFO retail system and desires to know how the December 31, 2017, inventory would appear under both systems. All pertinent data regarding purchases, sales, markups, and markdowns are shown below. There has been no change in the price level. Cost Retail Inventory, Jan. 1, 2017 \) 38,100 $ 60,000 Markdowns (net) 13,000 Markups (net) 22,000 Purchases (net) 130,900 178,000 Sales (net) 167,000 Instructions Determine the cost of the 2017 ending inventory under both (a) the conventional retail method and (b) the LIFO retail method

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