Exam 9: Inventories: Additional Valuation Issues

Under the lower-of-cost-or-market method, the replacement cost of an inventory item would be used as the designated market value

When inventory declines in value below original (historical) cost, and this decline is considered other than temporary, what is the maximum amount that the inventory can be valued at?

Ace 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 80,000 Cost of qoods sold \ 385,000 The average days to sell inventory for Ace are

Recording inventory at net realizable value is permitted, even if it is above cost, when there are no significant costs of disposal involved and

The LIFO retail method assumes that markups and markdowns apply only to the goods purchased during the period.

The original cost of an inventory item is above the replacement cost and the net realizable value.The replacement cost is below the net realizable value less the normal profit margin.As a result, under the lower-of-cost-or-market method, the inventory item should be reported at the

The inventory account of Lance Company at December 31, 2007, included the following items: Inventory Amount Merchandise out on consignment at sales price (including markup of 40 \% on selling price) \1 5,000 Goods purchased, in transit (shipped f.o.b. shipping point) 12,000 Goods held on consignment by Lance 13,000 Goods out on approval (sales price \ 7,600 , cost \ 6,400 ) 7,600 Based on the above information, the inventory account at December 31, 2007, should be reduced by

Net realizable value is

When the conventional retail inventory method is used, markdowns are commonly ignored in the computation of the cost to retail ratio because

Williamson Corporation acquired two inventory items at a lump-sum cost of $40,000.The acquisition included 3,000 units of product CF, and 7,000 units of product 3B.CF normally sells for $12 per unit, and 3B for $4 per unit.If Williamson sells 1,000 units of CF, what amount of gross profit should it recognize?

If the contract price on a noncancelable purchase commitment exceeds the market price, the buyer should record any expected losses on the commitment in the period in which the market decline takes place.

In a basket purchase, the cost of the individual assets acquired is determined on the basis of their relative sales value.

AJ Corporation, a manufacturer of ethnic foods, contracted in 2007 to purchase 500 pounds of a spice mixture at $5.00 per pound, delivery to be made in spring of 2008.By 12/31/07, the price per pound of the spice mixture had risen to $5.60 per pound.In 2007, AJ should recognize

The average days to sell inventory represents the average number of days' sales for which a company has inventory on hand.

When valuing raw materials inventory at lower-of-cost-or-market, what is the meaning of the term "market"?

Flynn Sales Company uses the retail inventory method to value its merchandise inventory.The following information is available for the current year: Cost Retail Beginning inventory \ 30,000 \ 50,000 Purchases 145,000 200,000 Freight-in 2,500 - Net markups - 8,500 Net markdowns - 10,000 Employee discounts - 1,000 Sales - 205,000 If the ending inventory is to be valued at the lower-of-cost-or-market, what is the cost to retail ratio?

In most situations, the gross profit percentage is stated as a percentage of cost.

At a lump-sum cost of $48,000, Sealy Company recently purchased the following items for resale: Item No. of Items Purchased Resale Price Per Unit 4,000 \ 2.50 2,000 8.00 6,000 4.00 The appropriate cost per unit of inventory is: M N O