[calicpa]

I got a question in wiley test bank that says inventory is a depreciable asset. Is this true?

I can’t copy and paste it, how do you guys post your wiley questions? You retype it? Or is there a way I can post a pic? or link to a pic.

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[tough_kitty]

Inventory??? I don't think so. You can only depreciate PP&E as far as I know.

Inventory is adjusted for lower of cost or market price.

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[tough_kitty]

Inventory??? I don't think so. You can only depreciate PP&E as far as I know.

Inventory is adjusted for lower of cost or market price.

FAR: 81 (May 2013)
BEC: 81 (July 2013)
REG: 83 (August 2013)
AUD: 82 (November 2013)
California CPA since 1/30/14

[calicpa]

Explanation for a question. Says Inventory is a depreciable asset.

This answer is correct. When the equity method is used, the investor should amortize any portion of the excess of fair values over carrying amounts (differential) that relates to depreciable or amortizable assets held by the investee. Amortization of the differential results in a reduction of the investment account and a reduction in the equity of the investee’s earnings. Inventory is a depreciable asset. Therefore, amortization of the portion of the differential that relates to inventory would decrease Park’s reported equity in Tun’s earnings. Land is not a depreciable asset, so there would be no amortization of the differential related to land, and therefore no effect on Park’s reported equity.

BEC - 84, 4/6/13
AUD - 77, 5/28/13
REG - 83, 4/12/14
FAR - 83, 10/3/13

Ethics - 90% 4/24/13

150 unit education requirement met!
Work experience met!

[calicpa]

Explanation for a question. Says Inventory is a depreciable asset.

This answer is correct. When the equity method is used, the investor should amortize any portion of the excess of fair values over carrying amounts (differential) that relates to depreciable or amortizable assets held by the investee. Amortization of the differential results in a reduction of the investment account and a reduction in the equity of the investee’s earnings. Inventory is a depreciable asset. Therefore, amortization of the portion of the differential that relates to inventory would decrease Park’s reported equity in Tun’s earnings. Land is not a depreciable asset, so there would be no amortization of the differential related to land, and therefore no effect on Park’s reported equity.

BEC - 84, 4/6/13
AUD - 77, 5/28/13
REG - 83, 4/12/14
FAR - 83, 10/3/13

Ethics - 90% 4/24/13

150 unit education requirement met!
Work experience met!

[tough_kitty]

Hmm. This answer is confusing. I'm guessing it's a FAR topic? I did Wiley too but can't recall this question.

Maybe someone else can clarify this.

It's been a long time since I studied for FAR so maybe I forgot something but I don't remember ever learning that inventory can be depreciated. Weird.

FAR: 81 (May 2013)
BEC: 81 (July 2013)
REG: 83 (August 2013)
AUD: 82 (November 2013)
California CPA since 1/30/14

[tough_kitty]

Hmm. This answer is confusing. I'm guessing it's a FAR topic? I did Wiley too but can't recall this question.

Maybe someone else can clarify this.

It's been a long time since I studied for FAR so maybe I forgot something but I don't remember ever learning that inventory can be depreciated. Weird.

FAR: 81 (May 2013)
BEC: 81 (July 2013)
REG: 83 (August 2013)
AUD: 82 (November 2013)
California CPA since 1/30/14

[Never_Give_Up1]

You need to list the question not just the answer. Depreciation of inventory is not GAAP. LCM is acceptable but that is not depreciation. Equity method is for your investment. You have three separate things going on in your explanation.

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[Never_Give_Up1]

You need to list the question not just the answer. Depreciation of inventory is not GAAP. LCM is acceptable but that is not depreciation. Equity method is for your investment. You have three separate things going on in your explanation.

FAR - 81
REG - 81
AUD - 82
BEC - 81

Ethics - Done
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[calicpa]

Yea its for FAR. That is the solution, not my description.

Do you know how to post pics?

BEC - 84, 4/6/13
AUD - 77, 5/28/13
REG - 83, 4/12/14
FAR - 83, 10/3/13

Ethics - 90% 4/24/13

150 unit education requirement met!
Work experience met!

[calicpa]

Yea its for FAR. That is the solution, not my description.

Do you know how to post pics?

BEC - 84, 4/6/13
AUD - 77, 5/28/13
REG - 83, 4/12/14
FAR - 83, 10/3/13

Ethics - 90% 4/24/13

150 unit education requirement met!
Work experience met!

[Never_Give_Up1]

After reading your explanation again think I might know what this is referring to. I will need to know the question though to go through it. But If I am thinking of the correct situation then the explanation would be correct… but it is an EXTREMELY horrible way of explaining it.

FAR - 81
REG - 81
AUD - 82
BEC - 81

Ethics - Done
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License - Licensed CPA in Utah

[Never_Give_Up1]

After reading your explanation again think I might know what this is referring to. I will need to know the question though to go through it. But If I am thinking of the correct situation then the explanation would be correct… but it is an EXTREMELY horrible way of explaining it.

FAR - 81
REG - 81
AUD - 82
BEC - 81

Ethics - Done
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License - Licensed CPA in Utah

[Never_Give_Up1]

I don't think A71 lets you… actually my only gripe I have about this site.

FAR - 81
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BEC - 81

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[Never_Give_Up1]

I don't think A71 lets you… actually my only gripe I have about this site.

FAR - 81
REG - 81
AUD - 82
BEC - 81

Ethics - Done
State License Exam - Done

License - Licensed CPA in Utah

[calicpa]

lol yea the explanation is pretty bad. I found it on becker website.

Park Co. uses the equity method to account for its January 1, 1990, purchase of Tun, Inc.'s common

stock. On January 1,1990, the fair values of Tun's FIFO inventory and land exceeded their carrying

amounts. How do these excesses of fair values over carrying amounts affect Park's reported equity in

Tun's 1990 earnings?

Inventory excess Land excess

a. Decrease Decrease

b. Decrease No effect

c. Increase Increase

d. Increase No effect

Choice “b” is correct. Park would record the additional COGS associated with the undervalued beginning

inventory by debiting Investment Income and crediting the Investment in Tun account. Since the

difference between book value and fair market value on land is not amortized, the difference in the land

value would have no effect on equity in earnings. APB 18 para. 19

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BEC - 84, 4/6/13
AUD - 77, 5/28/13
REG - 83, 4/12/14
FAR - 83, 10/3/13

Ethics - 90% 4/24/13

150 unit education requirement met!
Work experience met!

[Author]

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