Englehart Company sells two types of pumps. One is large and is for commercial use. The other

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Englehart Company sells two types of pumps. One is large and is for commercial use. The other is smaller and is used in residential swimming pools. The following inventory data is available for the month of March.

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In addition to the above information, due to a downturn in the economy that has hit Englehart??s commercial customers especially hard, Englehart expects commercial pump prices from March 31 onward to be considerably different (and lower) than at the beginning of and during March. Englehart has developed the following additional information.

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The normal profit margin is 16.67 percent of cost. Englehart uses the FIFO accounting method.Accounting(a) Determine the dollar amount that Englehart should report on its March 31 balance sheet for inventory. Assume Englehart applies lower-of-cost-or-market at the individual product level.(b) Repeat part (a) but assume Englehart applies lower-of-cost-or-market at the major category level. Englehart places both commercial and residential pumps into the same (and only) category.AnalysisWhich of the two approaches above (individual product level or major categories) for applying LCM do you think gives the financial statement reader better information?PrinciplesAssume that during April, the replacement cost of commercial pumps rebounds to $1,050 (assume this will be designated market value).(a) Briefly describe how Englehart will report in its April financial statements the inventory remaining from March 31.(b) Briefly describe the conceptual trade-offs inherent in the accounting in part(a).

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
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Related Book For  answer-question

Intermediate Accounting

ISBN: 978-0470587287

14th Edition

Authors: kieso, weygandt and warfield.

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