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Q1) "Company is engaged in manufacture and sale of chemicals, plastic materials, agricultural and other specialized services" 10-k

The Dow Chemical Company and Subsidiaries
Consolidated Balance Sheets (In Part)
(In Millions) At December 31, 2004 2003
Assets    
Current Assets $3,108 $2,392
Cash and cash equivalents 84 42
Marketable securities and interest-bearing deposits    
Accounts and notes receivable:    
Trade (net of allowance for doubtful receivable-2004:    
136;2003:$118) 4,753 3,574
Other 2,604 2,356
Inventories 4,957 4,050
Deferred income tax assets-current 384 698
Total current assets $15,890 $13,11

Note D-Inventories
Following table gives breakdown of inventories at December 31, 2004 and 2003:

Inventories at December 31
(In Millions) 2004 2003
Finished Goods $2,989 $2,396
Work in Process 889 837
Raw Materials 605 373
Supplies 474 444
Total inventories $4,957 $4,050

Reserves reducing inventories from \first-in, first-out ("FIFO") basis to \last-in, first-out ("LIFO") basis amounted to $807 million ar December 31,2004 and $330 million at December 31, 2003.

Inventories valued at LIFO basis, principally hydrocarbon and U.S. chemicals and plastics product inventories, represented 39 percent of total inventories at December 31, 2004 and 38 percent of total inventories at December 31, 2003.

Reduction of certain inventories resulted in liquidation of some quantities of LIFO inventory, increasing pretax income $154 million in 2004 and $70 million in 2003, and reducing pretax loss $71 million in 2002.

problems

A. Determine the inventory balance at December 31, 2004

B. Compute the inventory balance at Decmber 31, 2004, without reduction for LIFO reserve?

C. Why would liquidation of some quantities of LIFO inventory increase pretax income in 2004 by $154 million?

D. Must all inventory be costed in the same way? describe.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M919863

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