James, Inc., sells inventory to Matthews Company, a related party, at James’s standard gross profit rate. At the current fiscal year-end, Matthews still holds some portion of this inventory. If consolidated financial statements are prepared, why are worksheet entries required in two different fiscal periods?
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James, Inc., sells inventory to Matthews Company, a related party, at James’s standard gross profit rate. At the current fiscal year-end, Matthews still holds some portion of this inventory. If consolidated financial statements are prepared, why are worksheet entries required in two different fiscal periods?
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- Vaughn Inc. reported total assets of $6407000 and net income of $505000 for the current year. Vaughn determined that inventory was understated by $140000 at the beginning of the year and $60800 at the end of the year. Ignoring income taxes, what is the corrected amount for total assets and net income for the year? $6407000 and $505000. $6467800 and $425800. $6467800 and $565800. $6346200 and $584200.During year 3, Mayorca Corp. decided to change from the FIFOmethod of inventory valuation to the weighted-average method. Inventory balances under each method were as follows: FIFO Weighted-average January 1, year 3 P71,000 P77,000 December 31, year 3 79,000 83,000 Orca’s income tax rate is 30%. In its year 3 financial statements, what amount should Mayorca report as the gain or loss on the cumulative effect of this accounting change?At the balance sheet date, Clarkson Company held title to goods in transit amounting to $214,000. This amount was omitted from the purchases figure for the year and also from the ending inventory. What is the effect of this omission on the net income for the year as calculated when the books are closed? What is the effect on the company's financial position as shown in its balance sheet? Is materiality a factor in determining whether an adjustment for this item should be made?
- Which of the following statements is not true concerning interim financial reporting and inventories? A company that uses LIFO and encounters a temporary partial a) liquidation of its base period inventory must include the effects of the liquidation in the period in which it occurred. b) Provisions for write-downs to market should generally be the same for both the annual and interim reporting. A company that utilizes a periodic inventory system and uses c) estimated gross profit rates to determine costs of goods sold during interim periods should disclose any significant adjustments that result from reconciliation with the annual physical inventory. d) The same inventory pricing method used for annual reporting should generally be used for interim reporting.Before 2020, KnowieNowl Company used the cash basis of accounting. For the year ended December 31, KnowieNowl changed to the accrual basis. KnowieNowl cannot determine the beginning balance of supplies inventory. What effect of KnowieNowl’s inability to determine beginning supplies inventory on its 2020 accrual basis profit and December 31, 2020 accrual basis capital, respectively? a. overstated; overstated b. no effect; no effect c. no effect; overstated d. overstated; no effectOn 1/1/21, Shaye Corp. changed its inventory method to FIFO from LIFO for both financial and income tax reporting purposes. The change resulted in a $970k increase in the 1/1/21 inventory. Assume that the income tax rate for all years is 30%. Assuming that comparative statements are not issued, the cumulative effect of the accounting change should be reported by Shaye in its 2021...
- During Year 2, Orca Corp. decided to change from the FIFO method of inventory valuation to the weighted-average method. Inventory balances under each method were as follows. FIFO Weighted-averageJanuary 1, Year 2 $71,000 $77,000December 31, Year 2 $79,000 $83,000Orca's income tax rate is 30%.Orca should report the cumulative effect of this accounting change as a(n) a) adjustment to beginning retained earnings. b) component of income from continuing operations. c) extraordinary item. d) component of income after extraordinary items.At the end of the Year 2 accounting period, DeYoung Company determined that the market value of its inventory was $79,800. The historical cost of this inventory was $81,400. DeFazio uses the perpetual inventory method. Assuming the amount is immaterial, how will the necessary write-down to reduce the inventory to the lower-of-cost-or-market affect the company's financial statements? Multiple Choice O O Decrease total assets, gross margin, and net income Increase total assets and net income Decrease total assets and gross margin Decrease total assets and net incomeBelow is the net income of New Girl Instrument AG, a private company, computed under the two inventory methods using a periodic system. FIFO Average-Cost 2017 $26,000 $23,000 2018 30,000 25,000 2019 29,000 27,000 2020 34,000 30,000 (ignore tax considerations) Required: a. Assume that in 2020 New Girl decided to change from the FIFO method to the average-cost method of pricing inventories. Prepare the journal entry necessary for the change that took place during 2020, and show net income reported for 2017, 2018, 2019, and 2020. b. Assume that in 2020 New Girl, which had been using the average-cost method since beginning operations in 2017, changed to the FIFO method of pricing inventories. Prepare the journal entry necessary to record the change in 2020, and show net income reported for 2017, 2018, 2019, and 2020.