Question

(General Disclosures; Inventories; Property, Plant, and Equipment) Koch Corporation is in the process of preparing its annual financial statements for the fiscal year ended April 30, 2018. Because all of Koch’s shares are traded intrastate, the company does not have to file any reports with the Securities and Exchange Commission. The company manufactures plastic, glass, and paper containers for sale to food and drink manufacturers and distributors.

Koch Corporation maintains separate control accounts for its raw materials, work in process, and finished goods inventories for each of the three types of containers. The inventories are valued at the lower-of-cost-or-market.

The company’s property, plant, and equipment are classified in the following major categories: land, office buildings, furniture and fixtures, manufacturing facilities, manufacturing equipment, and leasehold improvements. All fixed assets are carried at cost. The depreciation methods employed depend on the type of asset (its classification) and when it was acquired.

Koch Corporation plans to present the inventory and fixed asset amounts in its April 30, 2018, balance sheet as shown below.

Inventories $4,814,200

Property, plant, and equipment (net of depreciation) 6,310,000

Instructions

What information regarding inventories and property, plant, and equipment must be disclosed by Koch Corporation in the audited financial statements issued to stockholders, either in the body or the notes, for the 2017–2018 fiscal year?

Short answer

Inventory and property, plant, and equipment information will be presented in the financial statements as well as the notes that accompany them.

Step-by-step solution

Meaning of Accounting Disclosure

Adeclaration that identifies the financial operations of a firm or business is known as an "accounting disclosure". This description tells how much money was spent and made at a specific time. An accounting policy statement is provided for existing and future investors in the company.

Explaining Disclosure regarding inventories

The following information about inventory must be disclosed by Coach Corporation.

1. The amount of money allocated to inventory.
2. Method for price lists, such as FIFO, LIFO, or weighted average.
3. Basis of valuation, that is, cost or low-cost-or-net realizable value or low-cost-or-market; If quantities other than cost are offered, costs should still be presented by specifying the amount of cost or the amount of valuation allowance.
4. Inventory is divided into three categories: raw materials, work-in-process, and finished goods.

Explaining disclosure regarding property, plant, and equipment

1. Balance of major depreciable asset groups (assets classified by nature or function).
2. Accumulated depreciation over time, either by major classes of depreciable assets or as a whole.
3. A comprehensive overview of the procedures for computing depreciation on different types of depreciable assets.
4. The total cost of depreciation for the period.