Air France–KLM Case
Per note 4.16, AF uses the weighted-average method to value its inventory. Under IFRS, the
FIFO (first-in, first-out) method also can be used. However, the LIFO (last-in, first-out) method,
which can be used under U.S. GAAP in addition to the average cost method and the FIFO
method, is prohibited under IFRS.
Exercise 8–6
Inventory balance before additional transactions $165,000
Add:
Exercise 8–7
Inventory balance before additional transactions $210,000
Add:
Exercise 8–8
1. Excluded
2. Included
Exercise 8–9
Requirement 1
July 15, 2018
……………………………………………………Accounts payable
July 23, 2018
Requirement 2
August 15, 2018
……………………………………………………………………..Cash
Requirement 3
The July 15 entry would include a debit to the inventory account instead of to
purchases, and the July 23 entry would include a credit to the inventory account
instead of to purchase discounts.
Exercise 8–10
Requirement 1
July 15, 2018
…………………………………………………..Accounts payable
July 23, 2018
……………………………………………………………………..Cash
Requirement 2
August 15, 2018
Accounts payable…………………………………………………… 49,000
Requirement 3
The July 15 entry would include a debit to the inventory account instead of to
purchases.
Exercise 8–11
Requirement 1
November 17, 2018
……………………………………………………Accounts payable
November 26, 2018
Requirement 2
December 15, 2018
Exercise 8–11 (concluded)
Requirement 3
Requirement 1:
November 17, 2018
……………………………………………………Accounts payable
November 26, 2018
……………………………………………………………………..Cash
Requirement 2:
December 15, 2018
……………………………………………………………………..Cash
Exercise 8–12
The FASB Accounting Standards Codification® represents the single
source of authoritative U.S. generally accepted accounting principles.
The specific citation for each of the following items is:
1. Define the meaning of cost as it applies to the initial measurement
of inventory.
FASB ASC 330–10–30–1: “Inventory–Overall–Initial Measurement.”
The primary basis of accounting for inventories is cost, which has
been defined generally as the price paid or consideration given to
2. Indicate the circumstances when it is appropriate to initially
measure agricultural inventory at fair value.
FASB ASC 905–330–30–1: “Agriculture–Inventory–Initial
Measurement.”
Exceptional cases exist in which it is not practicable to determine an
a. They have immediate marketability at quoted market prices that
cannot be influenced by the producer.
The accounting basis of those kinds of inventories shall be their
Exercise 8–12 (concluded)
3. What is a major objective of accounting for inventory?
FASB ASC 330–10–10–1: “Inventory–Overall–Objectives.”
4. Are abnormal freight charges included in the cost of inventory?
FASB ASC 330–10–30–7: “Inventory–Overall–Initial Measurement.”
Unallocated overheads shall be recognized as an expense in the period in
Exercise 8–13
Cost of goods available for sale:
Beginning inventory (2,000 x $6.10) $12,200
Purchases:
First-in, first-out (FIFO)
Cost of ending inventory:
Date of
purchase Units Unit cost Total cost
Last-in, first-out (LIFO)
Cost of ending inventory:
Date of
purchase Units Unit cost Total cost
Exercise 8–13 (concluded)
Average cost
Cost of ending inventory:
* Alternatively, could be determined by multiplying the units sold by the average