ExxonMobil Corporation, the world’s second-largest company, uses the LIFO inventory method for most of its inventories. Its inventory costs are heavily dependent on the cost of oil. When the price of oil was down, ExxonMobil, following the lower-of-cost-or-market (LCM) rule, wrote down its inventory by $325 million. In the next year, when the price of oil recovered, the company reported that market price exceeded the LIFO carrying values by $6.8 billion.10 Explain why the LCM rule resulted in a write-down in the first year. What is the inconsistency between the first- and second-year treatments of the change in the price of oil? How does the accounting convention of conservatism explain the inconsistency? If the price of oil declined substantially in a third year, what would be the likely consequence?
Answer to relevant QuestionsExxonMobil Corporation had net income of $41.0 billion in 2011. Inventories under the LIFO method used by the company were $11.7 billion in 2011. Inventory would have been $25.6 billion higher if the company had used FIFO. ...In what way does internal control contribute to faithful representation in its financial statements?Match the items with the related statements that follow.a. Control environmentb. Risk assessmentc. Control activitiesd. Information and communicatione. Monitoring 1. Policies and procedures management puts in place to see ...A small company maintains a petty cash fund for minor expenditures. In February and March 2014, the following transactions took place:a. The fund was established in the amount of $200.00 on Feb. 1 from the proceeds of check ...Fuentes is a retail store with several departments. Its internal control procedures for cash sales and purchases are as follows. Cash sales. The sales clerk in each department rings up every cash sale on the department’s ...
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