Accouting Class Assignment Question

Society Business and Career
1

I have a homework question for a inventory type question, is anyone really good at that???

2

Re: Accouting Class Assignment Question

well wht is exactly the question? So tat someone could tell whether they'l be helpful or not..

TC.....

3

Re: Accouting Class Assignment Question

Inventory, thas hte whole "cost of goods sold" and multi-step/single step income statement stuff ??

4

Re: Accouting Class Assignment Question

Gucci, http://www.paklinks.com/gs/showthread.php?t=182349** I had a question, i hope u can find ur answer in this thread..**

5

Re: Accouting Class Assignment Question

Where is the question?

6

Re: Accouting Class Assignment Question

I would appreciate help and input.

Note IM in Circuit City's 2005 annual report is titled Merchandise Inventory" and reads as follows

Inventory is comprised of finished goods held for sale and is stated at the lower of cost or market. Cost is determined by the average cost method. The company estimates the realizable value of inventory based on assumptions about forecasted consumer demand, market conditions and obsolence. If the estimated realizable value is less than cost, the inventory value is reduced to its estimated realizable value. If estimates regarding consumer demand and market conditions are inaccurate or unexpected changes in technology affect demand, the company could be exposed to losses in excess of amounts recorded.

Required: Fully Answer

  1. What inventory costing method does Circuit City use to value its inventory?Does this method seem appropriate for the type of business that the company operates (household technology)? Explain Answers

  2. Circuit City states its inventory at the lower of cost or market value. How does the company define "market"? What factors does it take into account in estimating the market value of its inventory?

  3. Why do you think the company included the last sentence above, which concludes with "the company could be exposed to losses in excess of amounts recorded"?

7

Re: Accouting Class Assignment Question


Are you really struggling to answer these questions or just don't want to use your brain cells? :)

In any case, brief answers are as follows. You can expand them as necessary

  1. As the accounting policy states, CC uses "average price method" for inventory costing. Considering that the Company deals with rapidly changing pricing of their inventory, and the fact that the market for their product is extremely competitive, use of either FIFO or LIFO will not provide any better results, therefore use of average price seems appropriate.

  2. "Market price" is defined as the price the Company expects to charge its customers in an arm's length transaction, based on consumer demand, market conditions and obsolence.

  3. Inventory held on-hand at the balance sheet date is adjusted for market price the Company expects to charge in the future period. If the market price drops in the future before the Company has sold the inventory, the Company will be forced to take additional charge for the value of the inventory. This will be over and above the charge the Company has presumably already taken at the balance sheet date to adjust closing inventory for lower of cost or market price.

8

Re: Accouting Class Assignment Question

its too hard and its worth alot of points that is why i want to make sure i get an A, and if i dont understand it i cant really get an A =/ Help me!

9

Re: Accouting Class Assignment Question

^ I already gave you the answers. If you want to do more research, look up annual reports (Form 10-K) of some other large electronic retailers and compare their accounting policy for inventory with Circuit City's and embellish your answer with more intelligent-sounding arguments.

10

Re: Accouting Class Assignment Question

^^ Fully answering the questions will not help Gucci. just direction will allowed on GS.

question to GUCCI why you want to get A if you know you will be providing some one elses answer ??? so do bit of hard work research, in this way you will learn and also acheive the grades you want. Good Luck

11

Re: Accouting Class Assignment Question

thanks a bunch !!!! i will refer to your answers =)