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QUESTIONS 1. In what ways are the inventory accounts of a retailing com- $1,500, what is the cost per unit if Zonker Inc. pays the freight charges? If these items were bought on 2/10, n/30 terms and the invoice and the freight bill were paid within the 10-day period, what would be the cost per unit? pany diffenent from those of a manufacturing company? 2. Why should inventories be included in (a) a statement of financial position and (b) the computation of net income? 3. What is the difference between a perpetual inventory and a physical inventory? If a company maintains a per- petual inventory, should its physical inventory at any date be equal to the amount indicated by the perpetual 11. Specific identification is sometimes said to be the ideal metd of assigning cost to inventory and to method of assigning cost to inventory and to cost of goods sold. Briefly indicate the arguments for and against this method of inventory valuation. inventory records? Why? 12. FIRO, average-cost, and LIFO methods are often used 4. Mishima, Inc. indicated in a recent annual report that instead of specific identification for inventory valuation approximately $19 million of merchandise was received purposes. Compare these methods with the specific identi- on consignment.Should Mishima, Inc. report this amount fication method, discussing the theoretical propriety of each on its balance sheet? Explain. method in the determination of income and asset valuation. 5. What is a repurchase agreement (product financing)apply dollar-value 13. How might a company obtain a price index in order to LIFO? arrangement? How should a product repurchase agree ment be reported in the financial statements? 14. Describe the LIFO double-extension method. Using the following information, compute the index at December 31, 2017, applying the double-extension method to a LIFO pool consisting of 25,500 units of product A and 10,350 units of product B. The base-year cost of product A is $10.20 and of product B is $37.00. The price at December 31, 2017, for product A is $21.00 and for product B is 545.60. (Round to two decimal places.) 6. Where, if at all, should the following items be classified on a balance sheet? Goods out on approval to customers. (b) Goods in transit that were recently purchased fo.b. (c) Land held by a realty firm for sale. (d) Raw materials. (e) Goods received on consignment (D Manufacturing supplies. 15. As compared with the FIFO method of costing invento- ries, does the LIFO method result in a larger or smaller net income in a period of rising prices? What is the com parative effect on net income in a period of falling prices? T. Define "cost" as applied to the valuation of inventories. 16. What is the dollar-value method of LIRO inventory valu- 8. Distinguish between product costs and period costs as ation? What advantage does the dollar-value method have over the specific goods approach of LIFO inventory valuation? Why will the traditional LIFO inventory cost. ing method and the dollar-value LIFO inventory costing method produce different inventory valuations if the composition of the inventory base changes? they relate to inventory 9. Ford Motor Co. is considering alternate methods of accounting for the cash discounts it takes when paying suppliers promptly. One method suggested was to neport counts as financial income when payments a. Explain the folowing terms. made. Conmment on the propriety of this approach 10. Zonker Inc. purchases 500 units of an item at an invoice a) LIFO layer

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