portion of the hogs produced are sold to outside third parties. PIGS does not have any commitments to sell live hogs to third parties and it does not hedge its live hogs through commodity futures contracts. PIGS has three major categories of hog inventory: (1) live hogs available for sale; (2) developing animals; and (3) processed pork products. Management is confident that the wholesale price of processed pork products exceeds the cost to bring such products to market. However, spot market prices
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PIGS should determine that an inventory impairment exists by recognizing that on September 30, 2009 the carrying cost for “the developing animals to be sold to third parties” is $31 for October 2009, while the future price for “lean hogs/cwt” for October 2009 is $29. PIGS have three alternatives for measuring the impairment: (a.) on a total inventory basis method, (b.) on a total live-inventory basis, and (c.) on a live-inventory basis, but only the hogs that are unable to be processed. For alternative
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Subject: Assessment of Impairment Date: January 1, 2003 I. Facts During this fiscal year, with the capture of the Big Bad Wolf, there is an increase of supply of pork and the market price of pork is on the decline. Although the market price for hogs is forecasted to stabilize within the year, Three Little Pigs, Inc. (PIGS) is dealt with the dilemma of whether they should impair their inventory of hogs, effective September 30, 2002. With three categories of hog inventory (live hogs for sale,
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ACCOUNTING FOR INVENTORIES For Merchandising Firms Inventories are valued at cost, net of discounts, and including transportation and other costs (ie: import duties) to prepare the goods for sale. Buying Inventory: * DR Merchandise Inventory, CR Cash/Accounts Payable Selling Inventory: * DR A/R or Cash, CR Revenues * DR Cost of Goods Sold Expense, CR Merchandise Inventory Lower of Cost or Market (LOCOM): * Inventories can sometimes decrease in value while
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if they should impair their inventory due to a decline in futures prices. Although prices are declining, it is believed that the futures prices will begin to recover within the year. PIGS inventories consists of the following: live hogs to be internally processed, developing animals to be internally processed, internally processed pork products, live hogs to be sold to a third party, and developing animals to be sold to a third party. The question of impairment applies only to the live hogs
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deferred tax asset should be reclassified as non- current asset. 2. Costing method for inventory Referring to Colgate’s footnote on summary on significant accounting policies, the company accounts for inventories using both the first-in, first-out (FIFO) method (80% of inventories) and the last-in, first-out (LIFO) method (20% of inventories) (page 55 of 10k). There’s a significant difference for inventory costing method
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determine if they should impair their inventory due to a decline in futures prices. Although prices are declining, it is believed that the futures prices will begin to recover within the year. PIGS inventories consists of the following: live hogs to be internally processed, developing animals to be internally processed, internally processed pork products, live hogs to be sold to a third party, and developing animals to be sold to a third party. The question of impairment applies only to the live hogs and
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lower cost or market on inventory valuation Valuing inventory is usually accomplished using one of three methods. FIFO (first in, first out), LIFO (last in, first out), and weighted average. With the FIFO method, the first items purchased would be the first items removed from the inventory. The LIFO method removes the most recently purchased inventory items first. Weighted average is a compromise between FIFO and LIFO. When weighted average is used the total cost of inventory available for sale
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my attention that ADT and its affiliates are unclear about why the additional information was requested on the adjusting lower cost of market inventory on valuation, the capitalizing interest on building construction, the recording of gains or losses on asset disposal, and the adjusting goodwill for impairment. The adjusting lower cost of market inventory on valuation is specified in Accounting Research Bulletin No. 43 (ARB No. 43). The Statement of Financial Accounting Standards (SFAS) No. 34 is
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Arrangements to provide financial support • Pledges of collateral Jones Co. is in a technology-intensive industry. Recently, one of its competitors introduced a new product with technology that might render obsolete some of Jones's inventory. The accounting staff wants to follow the appropriate authoritative literature in determining the accounting for this significant market event. Access the FASB Codification at http://asc.fasb.org/home to conduct research using the Codification
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