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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

Question:Amiras Corporation began operations on January 1, 2017, with a beginning inventory of \(30,100 at cost and \)50,000 at retail. The following information relates to 2017. Retail Net purchases (\(108,500 at cost) \)150,000 Net markups 10,000 Net markdowns 5,000 Sales revenue 126,900 Instructions (a) Assume Amiras decided to adopt the conventional retail method. Compute the ending inventory to be reported in the balance sheet. (b) Assume instead that Amiras decides to adopt the dollar-value LIFO retail method. The appropriate price indexes are 100 at January 1 and 110 at December 31. Compute the ending inventory to be reported in the balance sheet. (c) On the basis of the information in part (b), compute cost of goods sold.

The inventory of Oheto Company on December 31, 2017, consists of the following items. Part Quantity Cost per Unit Net Realizable Value 110 600 \( 95 \)100 111 1,000 60 52 112 500 80 76 113 200 170 180 120 400 205 208 121a 1,600 16 1 122 300 240 235 a Part No. 121 is obsolete and has a realizable value of $1 each as scrap. Instructions 1. Determine the inventory as of December 31, 2017, by the LCNRV method, applying this method to each item. 2. Determine the inventory by the LCNRV method, applying the method to the total of the inventory.

Kumar Inc. uses LIFO inventory costing. At January 1, 2017, inventory was \(214,000 at both cost and market value. At December 31, 2017, the inventory was \)286,000 at cost and $265,000 at market value. Prepare the necessary December 31 entry under (a) the cost-of-goods-sold method and (b) the loss method.

Prophet Company signed a long-term purchase contract to buy timber from the U.S. Forest Service at \(300 per thousand board feet. Under these terms, Prophet must cut and pay \)6,000,000 for this timber during the next year. Currently, the market value is \(250 per thousand board feet. At this rate, the market price is \)5,000,000. Jerry Herman, the controller, wants to recognize the loss in value on the year-end financial statements, but the financial vice president, Billie Hands, argues that the loss is temporary and should be ignored. Herman notes that market value has remained near $250 for many months, and he sees no sign of significant change. Instructions (a) What are the ethical issues, if any? (b) Is any particular stakeholder harmed by the financial vice president’s decision? (c) What should the controller do?

Kemper Company signed a long-term noncancelable purchase commitment with a major supplier to purchase raw materials in 2018 at a cost of \(1,000,000. At December 31, 2017, the raw materials to be purchased have a market value of \)950,000. Prepare any necessary December 31, 2017, entry.
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