Dye Corporation's computation of cost of goods sold is: \[\begin{array} { l r } \text { Beginning inventory } & \$ 60,000 \\ \text { Add: Cost of goods purchased } & 405,000 \\ \text { Cost of goods available for sale } & 465,000 \\ \text { Ending inventory } & 90,000 \\ \text { Cost of goods sold } & \$ 375,000 \end{array}\] The average days to sell inventory for Dye are

A) 58.4 days. B) 67.6 days. C) 73.0 days. D) 87.6 days. A) 58.4 days. B) 67.6 days. C) 73.0 days. D) 87.6 days.

Use the following information for questions The following data concerning the retail inventory method are taken from the financial records of Stone Company. $\begin{array}{lcc}&\text { Cost } & \text { Retail }\\\hline \text { Beginning inventory } & \$ 49,000 & \$ 70,000 \\ \text { Purchases } & 224,000 & 320,000 \\ \text { Freight-in } & 6,000 & - \\ \text { Net markups } & - & 20,000 \\ \text { Net markdowns } & - & 14,000 \\ \text { Sales } & - & 336,000 \end{array}$ -Assuming that the LIFO inventory method were used in conjunction with the data and that the inventory at retail had increased during the period, then the computation of retail in the cost to retail ratio would

A) exclude both markups and markdowns and include beginning inventory. B) include markups and exclude both markdowns and beginning inventory. C) include both markups and markdowns and exclude beginning inventory. D) exclude markups and include both markdowns and beginning inventory. A) exclude both markups and markdowns and include beginning inventory. B) include markups and exclude both markdowns and beginning inventory. C) include both markups and markdowns and exclude beginning inventory. D) exclude markups and include both markdowns and beginning inventory.

Use the following information for questions The following data concerning the retail inventory method are taken from the financial records of Stone Company. $\begin{array}{lcc}&\text { Cost } & \text { Retail }\\\hline \text { Beginning inventory } & \$ 49,000 & \$ 70,000 \\ \text { Purchases } & 224,000 & 320,000 \\ \text { Freight-in } & 6,000 & - \\ \text { Net markups } & - & 20,000 \\ \text { Net markdowns } & - & 14,000 \\ \text { Sales } & - & 336,000 \end{array}$ -Assuming no change in the price level if the LIFO inventory method were used in conjunction with the data, the ending inventory at cost would be

A) $42,600. B) $42,000. C) $40,800. D) $43,200. A) $42,600. B) $42,000. C) $40,800. D) $43,200.

Use the following information for questions The following data concerning the retail inventory method are taken from the financial records of Stone Company. $\begin{array}{lcc}&\text { Cost } & \text { Retail }\\\hline \text { Beginning inventory } & \$ 49,000 & \$ 70,000 \\ \text { Purchases } & 224,000 & 320,000 \\ \text { Freight-in } & 6,000 & - \\ \text { Net markups } & - & 20,000 \\ \text { Net markdowns } & - & 14,000 \\ \text { Sales } & - & 336,000 \end{array}$ -The ending inventory at retail should be

A) $74,000. B) $60,000. C) $64,000. D) $42,000. A) $74,000. B) $60,000. C) $64,000. D) $42,000.

At December 31, 2007, the following information was available from Dole Co.'s accounting records: $\begin{array}{lrr}&\text { Cost }& \text { Retail }\\ \text { Inventory, 1/1/07 } & \$ 147,000 & \$ 203,000 \\ \text { Purchases } & 833,000 & 1,155,000 \\ \text { Additional markups } & & 42,000 \\ \text { Available for sale } & \$ 980,000 & \$ 1,400,000 \end{array}$ Sales for the year totaled $1,050,000.Markdowns amounted to $10,000.Under the lower-of-cost-or-market method, Dole's inventory at December 31, 2007 was

A) $294,000. B) $245,000. C) $252,000. D) $238,000. A) $294,000. B) $245,000. C) $252,000. D) $238,000.

Gooch Corporation had the following amounts, all at retail: \[\begin{array} { l r l r } \text { Beginning inventory } & \$ 3,600 & \text { Purchases } & \$ 120,000 \\ \text { Purchase returns } & 6,000 & \text { Net markups } & 18,000 \\ \text { Abnormal shortage } & 4,000 & \text { Net markdowns } & 2,800 \\ \text { Sales } & 72,000 & \text { Sales returns } & 1,800 \\ \text { Employee discounts } & 1,600 & \text { Normal shortage } & 2,600 \end{array}\] What is Gooch's ending inventory at retail?

A) $54,400. B) $56,000. C) $57,600. D) $58,400 A) $54,400. B) $56,000. C) $57,600. D) $58,400

Teel Distribution Co.has determined its December 31, 2007 inventory on a FIFO basis at $250,000.Information pertaining to that inventory follows: \[\begin{array} { l r } \text { Estimated selling price } & \$ 255,000 \\ \text { Estimated cost of disposal } & 10,000 \\ \text { Normal profit margin } & 30,000 \\ \text { Current replacement cost } & 225,000 \end{array}\] Teel records losses that result from applying the lower-of-cost-or-market rule.At December 31, 2007, the loss that Teel should recognize is

A) $0. B) $5,000. C) $20,000. D) $25,000. A) $0. B) $5,000. C) $20,000. D) $25,000.

Exam 9: Inventories: Additional Valuation Issues

Application of the lower-of-cost-or-market rule results in inconsistency because a company may value inventory at cost in one year and at market in the next year.

(True/False)

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Question 61

Gore Company's accounting records indicated the following information: Inventory, 1/1/07 600,000 Purchases during 2007 3,000,000 Sales during 2007 3,800,000 A physical inventory taken on December 31, 2007, resulted in an ending inventory of $700,000.Gore's gross profit on sales has remained constant at 25% in recent years.Gore suspects some inventory may have been taken by a new employee.At December 31, 2007, what is the estimated cost of missing inventory?

(Multiple Choice)

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Question 62

Dye Corporation's computation of cost of goods sold is: Beginning inventory \ 60,000 Add: Cost of goods purchased 405,000 Cost of goods available for sale 465,000 Ending inventory 90,000 Cost of goods sold \ 375,000 The average days to sell inventory for Dye are

(Multiple Choice)

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Question 63

Most purchase commitments must be recorded as a liability.

(True/False)

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Question 64

Use the following information for questions The following data concerning the retail inventory method are taken from the financial records of Stone Company. Cost Retail Beginning inventory \ 49,000 \ 70,000 Purchases 224,000 320,000 Freight-in 6,000 - Net markups - 20,000 Net markdowns - 14,000 Sales - 336,000 -Assuming that the LIFO inventory method were used in conjunction with the data and that the inventory at retail had increased during the period, then the computation of retail in the cost to retail ratio would

(Multiple Choice)

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Question 65

GAAP requires reporting inventory at net realizable value, even if above cost, whenever there is a controlled market with a quoted price applicable to all quantities.

(True/False)

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Question 66

Jermaine Dye Corporation acquired two inventory items at a lump-sum cost of $50,000.The acquisition included 3,000 units of product LF, and 7,000 units of product 1B.LF normally sells for $15 per unit, and 1B for $5 per unit.If Dye sells 1,000 units of LF, what amount of gross profit should it recognize?

(Multiple Choice)

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Question 67

If a material amount of inventory has been ordered through a formal purchase contract at the balance sheet date for future delivery at firm prices,

(Multiple Choice)

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Question 68

A markup of 40% on cost is equivalent to what markup on selling price?

(Multiple Choice)

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Question 69

The retail inventory method is based on the assumption that the

(Multiple Choice)

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Question 70

A company should abandon the historical cost principle when the future utility of the inventory item falls below its original cost.

(True/False)

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Question 71

Use the following information for questions The following data concerning the retail inventory method are taken from the financial records of Stone Company. Cost Retail Beginning inventory \ 49,000 \ 70,000 Purchases 224,000 320,000 Freight-in 6,000 - Net markups - 20,000 Net markdowns - 14,000 Sales - 336,000 -Assuming no change in the price level if the LIFO inventory method were used in conjunction with the data, the ending inventory at cost would be

(Multiple Choice)

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Question 72

Use the following information for questions The following data concerning the retail inventory method are taken from the financial records of Stone Company. Cost Retail Beginning inventory \ 49,000 \ 70,000 Purchases 224,000 320,000 Freight-in 6,000 - Net markups - 20,000 Net markdowns - 14,000 Sales - 336,000 -The ending inventory at retail should be

(Multiple Choice)

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Question 73

At December 31, 2007, the following information was available from Dole Co.'s accounting records: Cost Retail Inventory, 1/1/07 \ 147,000 \ 203,000 Purchases 833,000 1,155,000 Additional markups 42,000 Available for sale \ 980,000 \ 1,400,000 Sales for the year totaled $1,050,000.Markdowns amounted to $10,000.Under the lower-of-cost-or-market method, Dole's inventory at December 31, 2007 was

(Multiple Choice)

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Question 74

The lower-of-cost-or-market method is used for inventory despite being less conservative than valuing inventory at market value.

(True/False)

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Question 75

Which statement is not true about the gross profit method of inventory valuation?

(Multiple Choice)

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Question 76

Gooch Corporation had the following amounts, all at retail: Beginning inventory \ 3,600 Purchases \ 120,000 Purchase returns 6,000 Net markups 18,000 Abnormal shortage 4,000 Net markdowns 2,800 Sales 72,000 Sales returns 1,800 Employee discounts 1,600 Normal shortage 2,600 What is Gooch's ending inventory at retail?

(Multiple Choice)

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Question 77

Lower-of-cost-or-market

(Multiple Choice)

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Question 78

Teel Distribution Co.has determined its December 31, 2007 inventory on a FIFO basis at $250,000.Information pertaining to that inventory follows: Estimated selling price \ 255,000 Estimated cost of disposal 10,000 Normal profit margin 30,000 Current replacement cost 225,000 Teel records losses that result from applying the lower-of-cost-or-market rule.At December 31, 2007, the loss that Teel should recognize is

(Multiple Choice)

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Question 79

Which of the following is not a basic assumption of the gross profit method?

(Multiple Choice)

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Question 80

Application of the lower-of-cost-or-market rule results in inconsistency because a company may value inventory at cost in one year and at market in the next year.

Dye Corporation's computation of cost of goods sold is: Beginning inventory \ 60,000 Add: Cost of goods purchased 405,000 Cost of goods available for sale 465,000 Ending inventory 90,000 Cost of goods sold \ 375,000 The average days to sell inventory for Dye are

Most purchase commitments must be recorded as a liability.

GAAP requires reporting inventory at net realizable value, even if above cost, whenever there is a controlled market with a quoted price applicable to all quantities.

If a material amount of inventory has been ordered through a formal purchase contract at the balance sheet date for future delivery at firm prices,

A markup of 40% on cost is equivalent to what markup on selling price?

The retail inventory method is based on the assumption that the

A company should abandon the historical cost principle when the future utility of the inventory item falls below its original cost.

The lower-of-cost-or-market method is used for inventory despite being less conservative than valuing inventory at market value.

Which statement is not true about the gross profit method of inventory valuation?

Lower-of-cost-or-market

Which of the following is not a basic assumption of the gross profit method?

Financial Accounting and Accounting Standards

Conceptual Framework Underlying Financial Accounting

The Accounting Information System

Income Statement and Related Information

Balance Sheet and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Current Liabilities and Contingencies

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