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A material overstatement in ending inventory was discovered
after the year-end financial statements of a company were
issued to the public. What effect did this error have on the
year-end financial statements?
Question 17
The following costs pertain to Den Co.'s purchase of inventory:
What amount should Den record as the cost of inventory as a
result of this purchase?
Question 18
Loft Co. reviewed its inventory values for proper pricing at
year-end. The following summarizes two inventory items
examined for the lower of cost or market: What amount should
Loft include in inventory at year-end, if it uses the total of the
inventory to apply the lower of cost or market?
Question 19
On January 1, 2004, Card Corp. signed a three-year,
noncancelable purchase contract, which allows Card to
purchase up to 500,000 units of a computer part annually from
Hart Supply Co. at $.10 per unit and guarantees a minimum
annual purchase of 100,000 units. During 2004, the part
unexpectedly became obsolete. Card had 250,000 units of this
inventory at December 31, 2004 and believes these parts can be
sold as scrap for $.02 per unit. What amount of probable loss
from the purchase commitment should Card report in its 2004
income statement?
Question 20