Robots, Inc. Robots, Inc. reported the following information regarding 2016–2017 inventory. Robots, Inc. 2017 2016 Current assets Cash $ 153,010 $ 538,489 Accounts receivable, net of allowance for doubtful accounts of $46,000 in 2017 and $160,000 in 2016 1,627,980 2,596,291 Inventories (Note 2) 1,340,494 1,734,873 Other current assets 123,388 90,592 Assets of discontinued operations — 32,815 Total current assets 3,244,872 4,993,060 Notes to Consolidated Financial Statements Note 1 (in part): Nature of Business and Significant Accounting Policies Inventories—Inventories are stated at the lower-of-cost-or-market. Cost is determined by the last-in, first-out (LIFO) method. Note 2: Inventories consist of the following. 2017 2016 Raw materials $1,264,646 $2,321,178 Work in process 240,988 171,222 Finished goods and display units 129,406 711,252 Total inventories 1,635,040 3,203,652 Less: Amount classified as long-term 294,546 1,468,779 Current portion $1,340,494 $1,734,873 Inventories are stated at the lower of cost determined by the LIFO method or market for Robots, Inc. If the FIFO method had been used for the entire consolidated group, inventories after an adjustment to the lower-of-cost-ormarket would have been approximately $2,000,000 and $3,800,000 at October 31, 2017 and 2016, respectively. Inventory has been written down to estimated net realizable value, and results of operations for 2017, 2016, and 2015 include a corresponding charge of approximately $868,000, $960,000, and $273,000, respectively, which represents the excess of LIFO cost over market. Inventory of $294,546 and $1,468,779 at October 31, 2017 and 2016, respectively, shown on the balance sheet as a noncurrent asset represents that portion of the inventory that is not expected to be sold currently. Reduction in inventory quantities during the years ended October 31, 2017, 2016, and 2015 resulted in liquidation of LIFO inventory quantities carried at a lower cost prevailing in prior years as compared with the cost of fiscal 2014 purchases. The effect of these reductions was to decrease the net loss by approximately $24,000, $157,000, and $90,000 at October 31, 2017, 2016, and 2015, respectively. Instructions (a) Comment on why Robots, Inc., might disclose how its LIFO inventories would be valued under FIFO. (b) Why does the LIFO liquidation reduce operating costs? (c) Comment on whether Robots, Inc. would report more or less income if it had been on a FIFO basis for all its inventory Show
July 14, 2022/ Steven Bragg
The retail inventory method is used by retailers that resell merchandise to estimate their ending inventory balances. This method is based on the relationship between the cost of merchandise and its retail price. The method is not entirely accurate, and so should be periodically supplemented by a physical inventory count. Its results are not adequate for the year-end financial statements, for which a high level of inventory record accuracy is needed. How to Calculate the Retail Inventory MethodTo calculate the cost of ending inventory using the retail inventory method, follow these steps:
Example of the Retail Inventory MethodMilagro Corporation sells home coffee roasters for an average of $200, and which cost it $140. This is a cost-to-retail percentage of 70%. Milagro’s beginning inventory has a cost of $1,000,000, it paid $1,800,000 for purchases during the month, and it had sales of $2,400,000. The calculation of its ending inventory is:
Retail Method Advantages and DisadvantagesThe retail inventory method is a quick and easy way to determine an approximate ending inventory balance. However, there are also several issues associated with it, which are as follows:
Terms Similar to Retail Inventory MethodThe retail inventory method is also known as the retail method and the retail inventory estimation method. What is retail method of inventory?The retail inventory method calculates the ending inventory value by totaling the value of goods that are available for sale, which includes beginning inventory and any new purchases of inventory. Total sales for the period are subtracted from goods available for sale.
Is the retail inventory method LIFO or FIFO?The retail method can be used with FIFO, LIFO, or the weighted average cost flow assumption. It is based on the (known) relationship between cost and retail prices of inventory. In addition it is used in conjunction with the dollar value LIFO method.
Why the retail inventory method is used widely?17. The retail inventory method is widely used (a) to permit the computation of net income without a physical count of inventory, (b) as a control measure in determining inventory shortages, (c) in regulating quantities of inventory on hand, and (d) for insurance information.
Is the retail inventory method GAAP?The retail inventory method is considered acceptable under the tenets of the US GAAP because the technique's calculations take into account markdowns and inventory depreciation and thus generate appropriately conservative price estimates.
|
With regard to the retail inventory method, which is the most accurate statement
zusammenhängende Posts
Urheberrechte © © 2024 berikutyang Inc.
