Exam 9: Inventories: Additional Valuation Issues

Gamma Ray Corp.has annual sales totaling $650,000 and an average gross profit of 20% of cost.What is the dollar amount of the gross profit?

East Corporation's computation of cost of goods sold is: The average days to sell inventory for East are

Braum Dairy produces milk to sell to local and national ice cream producers.Braum Dairy began operations on January 1, 2011 by purchasing 650 milk cows for $780,000.The company controller had the following information available at year end relating to the cows: On Braum Dairy's income statement for the year ending December 31, 2011, what amount of unrealized gain on biological assets will be reported?

The inventory turnover ratio is computed by dividing the cost of goods sold by the ending inventory on hand.

Agricultural produce is

An inventory of wheat held by a broker-trader is valued at net realizable value.

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

On August 31, a hurricane destroyed a retail location of Vinny's Clothier including the entire inventory on hand at the location.The inventory on hand as of June 30 totaled $320,000.From June 30 until the time of the hurricane, the company made purchases of $85,000 and had sales of $250,000.Assuming the rate of gross profit to selling price is 40%, what is the approximate value of the inventory that was destroyed?

Use the following information for questions. Plank Co.uses the retail inventory method.The following information is available for the current year. -If the ending inventory is to be valued at approximately lower-of-average-cost-or-net realizable value, the calculation of the cost ratio should be based on cost and retail of

Turner 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 Turner sells 1,000 units of LF, what amount of gross profit should it recognize?

Robust Inc.has the following information related to an item in its ending inventory.Packit (Product # 874) has a cost of $498, a selling price of $536, a cost to complete of $62, and a cost to sell of $28.What is the lower-of-cost-or-net realizable inventory value for Packit?

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

Keen Company's accounting records indicated the following information: A physical inventory taken on December 31, 2010, resulted in an ending inventory of $700,000.Keen's gross profit on sales has remained constant at 25% in recent years.Keen suspects some inventory may have been taken by a new employee.At December 31, 2010, what is the estimated cost of missing inventory?

Agricultural produce is harvested from biological assets and is measured at fair value less costs to sell at the point of harvest.

Goren Corporation had the following amounts, all at retail: What is Goren's ending inventory at retail?

Barker Pet supply uses the conventional retail method to determine its ending inventory at cost.Assume the beginning inventory at cost (retail) were $265,600 ($326,900), purchases during the current year at cost (retail) were $1,068,600 ($1,386,100), freight-in on these purchases totaled $63,900, sales during the current year totaled $1,302,000, and net markups (markdowns) were $2,000 ($96,300).What is the ending inventory value at cost?

What is the effect of net markups on the cost-retail ratio when using the conventional retail method?

Lucy's Llamas purchased 1,000 llamas on January 1, 2011.These llamas will be sheared semiannually and their wool sold to specialty clothing manufacturers.The llamas were purchased for $148,000.During 2011 the change in fair value due to growth and price changes is $9,400, the wool harvested but not yet sold is valued at net realizable value of $18,000, and the change in fair value due to harvest is ($1,150).What is the value of the llamas on Lucy's Llamas statement of financial position on June 30, 2011?

Under International Financial Reporting Standards (IFRS), when companies value inventory using the lower-of-cost-or-net realizable value (LCNRV), in most situations, companies price inventory on a total-inventory basis.

Robertson 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 Robertson sells 1,000 units of CF, what amount of gross profit should it recognize?