ACTG 3110 Chapter 9

retrospectively

Generally, voluntary changes in accounting principles are accounted for

NRV formula

selling price - cost to sell

they do not restate prior year financial statements.

When a company changes to the LIFO inventory method,

LIFO

When a company changes to the _____ inventory method from any other method, it usually is impossible to calculate the income effect on prior years.

The recovery of value is ignored.

When a company records a loss on purchase commitment and the inventory market price later recovers, what occurs?

revise prior years' financial statements.

When accounting changes are applied retrospectively, the first step is to

LIFO

The _____ method assumes that units sold are those most recently acquired.

market

When the commitment price exceeds the market price, inventory should be recorded at what price?

Purchase commitment

A contract that obligates a company to purchase a specific amount of merchandise, at a specific price, on or before a specific date is referred to as what?

prior income statements and balance sheets

A retrospective change in inventory method would normally cause changes to

financial statement comparability.

Accounting principles should be applied consistently because this practice enhances

retrospectively.

Changes in inventory methods, other than a change to LIFO, are treated

protect against price increases.

Companies utilize purchase agreements primarily to:

market price

In a purchase commitment, if market price at acquisition is less than the contract price, the purchase is recorded at what price?

enhance

Inventory related note disclosures _____ earnings quality.

debit retained earnings and credit inventory.

Omar Company uses a periodic inventory system and erroneously overstates ending inventory by $10,000 for the year ended December 2016. If Omar discovers this error in 2017, it should

prices decrease after the commitment was made.

Purchase commitments carry the potential disadvantage or risk that

beginning inventory in the year the LIFO method is adopted.

The base year inventory for all future LIFO determinations is the

less precise

The conventional retail method gives a(n) _____ measurement for ending inventory than the lower of cost and net realizable value method.

cannot

Under US GAAP, losses on purchase commitments______ recovered if the market price of the inventory increases.

Ending inventory at retail

Using the LIFO retail method, we determine if a new layer at retail has been added by comparing beginning inventory at retail to what?

dollar-value LIFO retail

Using the _____ method allows a company to determine if there has been a "real" increase in quantity of inventory.