Adjusting COGS for mark up of inventory

Any thoughts? Isn’t COGS higher? I don’t want to hijack the FMV vs MV thread.

yes, by 1400.

So Gross Margin lower?

KCollier Wrote: ------------------------------------------------------- > Any thoughts? Isn’t COGS higher? I don’t want to > hijack the FMV vs MV thread. I wrote it up 1400 (or something like that) in the gross margin calc, I couldn’t come to one of the answers listed, but I took the closest one to it. It was lower than if you just added the 2 income stmts together, I’m guessing that’s right.

guys it is ifrs, everything is already FIFI and no adjustment needed, plus when merger done, fair value already used

jainan33 Wrote: ------------------------------------------------------- > guys it is ifrs, everything is already FIFI and no > adjustment needed, plus when merger done, fair > value already used this is a beautiful thing if that’s the case, i totally forgot about this

jainan33 Wrote: ------------------------------------------------------- > guys it is ifrs, everything is already FIFI and no > adjustment needed, plus when merger done, fair > value already used +1 Exactly my thought process on this one. The trick was that no real adjustments were needed.

just sales -cogs over sales?

just sales -cogs over sales?

If that’s the case - I dont think it’s a LIFO, FIFO issue. If they had to mark up the inventory after the merger. It tells me that the inventory was undervalued. Even if you are looking at a company that uses IFRS as an analyst you would want to convert the inventory to FIFO (so it wouldnt be undervalued) and adjust the income statement to reflect LIFO. I’m pretty sure you had to adjust for the 1400. I know that I got an answer that matched.

Yes, agreed that you adjust for the 1400, not because of LIFO/FIFO but because of the acquisition where the Inventory was written up - that transfers to the COGS. @alimesoda - yes, I would say Sales - COGS (written up for change in Inventory) / Sales

sebrock Wrote: ------------------------------------------------------- > If that’s the case - I dont think it’s a LIFO, > FIFO issue. If they had to mark up the inventory > after the merger. It tells me that the inventory > was undervalued. Even if you are looking at a > company that uses IFRS as an analyst you would > want to convert the inventory to FIFO (so it > wouldnt be undervalued) and adjust the income > statement to reflect LIFO. > > I’m pretty sure you had to adjust for the 1400. I > know that I got an answer that matched. I did the same and got the exact answer, which was B. If you did not mark up you got C. nothing to do with FIFO/LIFO - you had to adjust COGS by the same amount the inventory was marked up to fair value (1,400).

But why do this after the merger, it should be done before and the statement at the time of merger is FV adjusted. What a stupid, tricky question

jainan33 Wrote: ------------------------------------------------------- > But why do this after the merger, it should be > done before and the statement at the time of > merger is FV adjusted. What a stupid, tricky > question Stupid, tricky question was the theme of the exam.

i just subtracted regular cogs. basically they got rid of their entire inventory, and you had to change cogs to the written up inventory value?

I cant even rememebr what i did. Was that Sh#*t about COGS in some fine print or something?

Yardy Wrote: ------------------------------------------------------- > I cant even rememebr what i did. Was that Sh#*t > about COGS in some fine print or something? there was no fine print or mention of COGS outside the income statement - u just had to calculate the gross margin

basically they got rid of their entire inventory, and you had to change cogs to the written up inventory value? did they get rid of part of it and you had to jack up COGS by the pro-rata share of the inventory fair value write-up? i completely missed this part of the question.

supersharpshooter Wrote: ------------------------------------------------------- > basically they got rid of their entire inventory, > and you had to change cogs to the written up > inventory value? did they get rid of part of it > and you had to jack up COGS by the pro-rata share > of the inventory fair value write-up? i completely > missed this part of the question. Woah - that’s a really good point. Maybe we weren’t supposed to mark up the COGS. I could have sworn that there was a reason to do so but now that you’re asking, I can’t really remember what the reason was. FML

supersharpshooter Wrote: ------------------------------------------------------- > basically they got rid of their entire inventory, > and you had to change cogs to the written up > inventory value? did they get rid of part of it > and you had to jack up COGS by the pro-rata share > of the inventory fair value write-up? i completely > missed this part of the question. im standing by my man supersharpshooter on this bad boy