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Module 4 Case Questions

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9 views

Module 4 Case Questions

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smasakwa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ACCY500 Accounting Measurement, Reporting and Control:

Module 4 Cases

Question 1: Samsung Electronics Co., Ltd. - Accounts


Receivable

Refer to the 2022 annual report of Samsung Electronics Co., Ltd. Using the information
in the statements of financial position, statements of profit or loss and the excerpts of
the notes provided below, please answer the following questions.

1. What is the amount of trade receivables as of December 31, 2022 that Samsung
Electronics does not expect to collect?

2. What is the amount of trade receivables written-off in 2022?

3. Suppose that during 2022 Samsung Electronics has collected 150,000,000 million
Korean Won worth of trade receivables. What is your estimate of the amount of
credit sales that Samsung Electronics has recognized in fiscal year 2022?

[hint: use the movement in gross trade receivables to estimate credit sales]

4. Suppose that in 2022 Samsung Electronics was considering recording a higher (than
currently) recorded provision for impairment of trade receivables by 13,000 million
Korean Won. How would the following financial reporting items have changed had
Samsung Electronics taken the additional charge of 13,000 million Korean Won?
[Ignore any income tax effects]

a. Total Assets as of December 31, 2022:


b. Net Income for fiscal 2022:
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Question 2: Marathon Petroleum Corporation - Inventory

Please consider the excerpts from Marathon Petroleum Corporation’s annual report for
fiscal year 2022 below and answer the following questions.

1. What inventory cost flow assumption(s) does Marathon Petroleum Corporation


(Marathon) use to determine the cost of inventories?

2. What is the value of inventory write-downs in fiscal year 2022?

3. If the company recorded inventory write-downs, what would be the impact in 2022
on the balance sheet and on the income statement?

4. What is the amount of inventory purchases in fiscal year 2022?

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Notes to Consolidated Financial Statements
2. Summary of Principal Accounting Policies

Inventories – Inventories are carried at the lower of cost or market value. Cost of inventories
is determined primarily under the LIFO method. Costs for crude oil, refinery feedstocks and
refined product inventories are aggregated on a consolidated basis for purposes of assessing if
the LIFO cost basis of these inventories may have to be written down to market value.

The LIFO method accounted for 88 percent of total inventory value at both December 31,
2022 and 2021. Current acquisition costs were estimated to exceed the LIFO inventory value
by $3.72 billion as of December 31, 2022. There was $2.84 billion excess of replacement or
current cost over our stated LIFO cost at December 31, 2021.

The cost of inventories of crude oil and refined products is determined primarily under
the LIFO method.

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Question 3: The Kroger Co. - Inventory

Please consider the excerpts from the Kroger Co. annual report for fiscal year 2022
below and answer the following questions.

1. Which cost flow assumption does Kroger use to value its inventory?

2. Suppose Kroger had used FIFO as a cost flow assumption for all of their inventories.
Would the book value of Inventories at January 28, 2023 be higher than, lower than,
or the same as the amount currently recorded? If different, by how much?

3. What is the amount of COGS if inventory purchases is $125,000 million in the year
ended January 28, 2023?

4. What is a LIFO Liquidation? When was the last time Kroger had a material LIFO
liquidation? What was the effect of that LIFO liquidation on Kroger’s cost of
products sold?

5. If Kroger had used FIFO as a cost flow assumption for all of their inventories,
recalculate the value of COGS on a FIFO basis.

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THE KROGER CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in the Notes to Consolidated Financial Statements are in
millions except per share amounts.)

Note 1—Accounting Policies

Inventories—Inventories are stated at the lower of cost (principally on a last-in,


first-out “LIFO” basis) or market. In total, approximately 89% of inventories in
2022 and 91% of inventories in 2021 were valued using the LIFO method. The
remaining inventories, including substantially all fuel inventories, are stated at the
lower of cost (on a FIFO basis) or net realizable value. Replacement cost was higher
than the carrying amount by $2,196 at January 28, 2023 and $1,570 at January 29,
2022. The Company follows the Link-Chain, Dollar-Value LIFO method for
purposes of calculating its LIFO charge or credit. During 2020, the Company had a
LIFO liquidation primarily related to pharmacy inventory. The liquidated inventory
was carried at lower costs prevailing in prior years as compared with current costs.
The effect of this reduction in inventory decreased “Merchandise costs” by
approximately $76, $58 net of tax.

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