Question 1

Under the retail inventory method:

Accepted Answer

A) A company measures inventory on its balance sheet by converting retail prices to cost. 
B) A company measures inventory on its balance sheet at current selling prices. 
C) A company measures inventory on its balance sheet on a LIFO basis. 
D) None of these is correct. 
A) A company measures inventory on its balance sheet by converting retail prices to cost. 
B) A company measures inventory on its balance sheet at current selling prices. 
C) A company measures inventory on its balance sheet on a LIFO basis. 
D) None of these is correct. A

Question 2

In applying the LCM rule, the inventory of rehab supplies would be valued at:

Accepted Answer

A) $122. 
B) $158. 
C) $162. 
D) $155.$155 designated market value is less than $162 cost. 
A) $122. 
B) $158. 
C) $162. 
D) $155.$155 designated market value is less than $162 cost. D

Question 3

A change from LIFO to any other inventory method is accounted for retrospectively.

Accepted Answer

A) True 
 B)False  True

Question 4

Fad City sells novel clothes which are subject to a great deal of price volatility. A recent item which cost $20 was marked up $12, marked down for a sale by $6 and then had a markdown cancellation of $3. The latest selling price is:

Accepted Answer

A) $14. 
B) $26. 
C) $29. 
D) $35. 
A) $14. 
B) $26. 
C) $29. 
D) $35.

Question 5

To determine if an increase in the dollar value of inventory is due to increased quantities, using dollar-value LIFO retail:

Accepted Answer

A) Compare beginning and ending inventory amounts at current year prices. 
B) Compare beginning and ending inventory amounts after adjusting both amounts to the average price level for the year. 
C) Inflate beginning inventory amount to end of year prices and compare to ending inventory amount. 
D) Deflate the ending inventory amount to beginning of year prices and compare to the beginning inventory amount. 
A) Compare beginning and ending inventory amounts at current year prices. 
B) Compare beginning and ending inventory amounts after adjusting both amounts to the average price level for the year. 
C) Inflate beginning inventory amount to end of year prices and compare to ending inventory amount. 
D) Deflate the ending inventory amount to beginning of year prices and compare to the beginning inventory amount.

Question 6

In applying LCM, market cannot be:

Accepted Answer

A) Less than net realizable value. 
B) Greater than the normal profit. 
C) Less than the normal profit margin. 
D) Greater than net realizable value. 
A) Less than net realizable value. 
B) Greater than the normal profit. 
C) Less than the normal profit margin. 
D) Greater than net realizable value.

Question 7

On March 17, 2009, a flood destroyed the entire inventory of Beatty Co. The following information is available from its accounting records:
Required: Compute the estimated cost of inventory lost in the flood.
 $\begin{array}{lr}
\text { Inventory, January 1, 2009 } & \$ 208,000 \
\text { Purchases, Jan. 1 - Mar. 17 } & 420,000 \
\text { Sales, Jan. 1 - Mar. 17 } & 600,000 \
\text { Normal gross margin } & 40 \%
\end{array}$

Accepted Answer

*$600,000

Question 8

The cost-to-retail percentage used in the retail method to approximate average costs considers both markdowns and markups.

Accepted Answer

A) True 
 B)False

Question 9

DK Super Stores Inc. uses the average cost retail method to estimate its ending inventory. Information at June 30, 2009, is as follows:
Required:
Compute the cost-to-retail percentage used by DK.
 $$\begin{array} { l c c } 
& \text { Cost } & \text { Retail } \
\text { Beginning inventory } & & \$ 105,000 \
\text { Net purchases } & & 375,000 \
\text { Net sales } & & 380,000 \
\text { Ending inventory } & \$ 64,000
\end{array}$$

Accepted Answer

Cost-to-retail perce

Question 10

On July 8, a fire destroyed the entire merchandise inventory on hand of Larrenaga Wholesale Corporation. The following information is available: What is the estimated inventory on July 8 immediately prior to the fire?

Accepted Answer

A) $192,000 
B) $490,000 
C) $510,000 
D) $280,000 
A) $192,000 
B) $490,000 
C) $510,000 
D) $280,000

Question 11

Hawkeye Auto Parts uses the retail method to estimate inventories. Data for the first six months of 2009 include: beginning inventory at cost and retail were $55,000 and $100,000, net purchases at cost and retail were $785,000 and $1,300,000, and sales during the first six months totaled $800,000. The estimated inventory at June 30, 2009, would be:

Accepted Answer

A) $330,000. 
B) $360,000. 
C) $362,300. 
D) None of these is correct. 
A) $330,000. 
B) $360,000. 
C) $362,300. 
D) None of these is correct.

Question 12

In applying LCM, market cannot be:

Accepted Answer

A) Less than net realizable value minus a normal profit margin. 
B) Net realizable value less reasonable completion and disposal costs. 
C) Greater than net realizable value reduced by an allowance for normal profit margin. 
D) Less than cost. 
A) Less than net realizable value minus a normal profit margin. 
B) Net realizable value less reasonable completion and disposal costs. 
C) Greater than net realizable value reduced by an allowance for normal profit margin. 
D) Less than cost.

Question 13

The average cost-to-retail percentage is:

Accepted Answer

A) 52.2%. 
B) 61.5%. 
C) 56.8%. 
D) 55%.Cost-to-retail percentage = $341,000 $620,000 = 55% 
A) 52.2%. 
B) 61.5%. 
C) 56.8%. 
D) 55%.Cost-to-retail percentage = $341,000 $620,000 = 55%

Question 14

Current period cost-to-retail percentage is:

Accepted Answer

A) 70.0%. 
B) 68.7%. 
C) 63.6%. 
D) 63.5%. 
A) 70.0%. 
B) 68.7%. 
C) 63.6%. 
D) 63.5%.

Question 15

The gross profit method and retail method are both ways of estimating ending inventory. Briefly explain how the two methods differ.

Accepted Answer

Both the gross profit method and retail

Question 16

The conventional cost-to-retail percentage is:

Accepted Answer

A) 82.6%. 
B) 66.7%. 
C) 71.9%. 
D) 75.8%.66.7% 
A) 82.6%. 
B) 66.7%. 
C) 71.9%. 
D) 75.8%.66.7%

Question 17

Under the conventional retail method, which of the following are not included in the denominator of the current period cost-to-retail conversion percentage?

Accepted Answer

A) Purchase returns 
B) Net markups 
C) Purchases 
D) Net markdowns 
A) Purchase returns 
B) Net markups 
C) Purchases 
D) Net markdowns

Question 18

To use the dollar-value LIFO retail method for inventory, the second step is to determine the estimated:

Accepted Answer

A) Ending inventory at current year retail prices. 
B) Cost of goods sold for the current year. 
C) Ending inventory at cost. 
D) Ending inventory at base year retail prices. 
A) Ending inventory at current year retail prices. 
B) Cost of goods sold for the current year. 
C) Ending inventory at cost. 
D) Ending inventory at base year retail prices.

Question 19

To the nearest thousand, estimated ending inventory using the conventional retail method is:

Accepted Answer

A) $36,000. 
B) $32,000. 
C) $33,000. 
D) $29,000.29,000 
A) $36,000. 
B) $32,000. 
C) $33,000. 
D) $29,000.29,000

Question 20

Ramsgate Company has used the FIFO method for inventory valuation since it began business in 2005, but has elected to change to the average cost method starting in 2008. Year-end inventory valuations under each method are shown below:
Required:
What journal entry, if any, would Ramsgate record in 2008 for the cumulative effect of the change in accounting principle (ignore income taxes)?

Accepted Answer

No cumulative effect of the accounting c

Under the retail inventory method:

In applying the LCM rule, the inventory of rehab supplies would be valued at:

A change from LIFO to any other inventory method is accounted for retrospectively.

Fad City sells novel clothes which are subject to a great deal of price volatility. A recent item which cost $20 was marked up $12, marked down for a sale by $6 and then had a markdown cancellation of $3. The latest selling price is:

To determine if an increase in the dollar value of inventory is due to increased quantities, using dollar-value LIFO retail:

In applying LCM, market cannot be:

The cost-to-retail percentage used in the retail method to approximate average costs considers both markdowns and markups.

On July 8, a fire destroyed the entire merchandise inventory on hand of Larrenaga Wholesale Corporation. The following information is available: What is the estimated inventory on July 8 immediately prior to the fire?

In applying LCM, market cannot be:

The average cost-to-retail percentage is:

Current period cost-to-retail percentage is:

The gross profit method and retail method are both ways of estimating ending inventory. Briefly explain how the two methods differ.

The conventional cost-to-retail percentage is:

Under the conventional retail method, which of the following are not included in the denominator of the current period cost-to-retail conversion percentage?

To use the dollar-value LIFO retail method for inventory, the second step is to determine the estimated:

To the nearest thousand, estimated ending inventory using the conventional retail method is:

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement and Statement of Cash Flows

Income Measurement

Time Value of Money Concepts

Cash and Receivables

Inventories: Measurement

Operational Assets: Acquisition and Disposition

Operational Assets: Utilization and Impairment

Investments

Current Liabilities and Contingencies

Bonds and Long-Term Notes

Leases

Accounting for Income Taxes

Pensions and Other Postretirement Benefits

Shareholders Equity

Share-Based Compensation and Earnings Per Share

Accounting Changes

The Statement of Cash Flows

Appendix a Derivatives

Filters

Exam 9: Inventories: Additional Issues

Under the retail inventory method:

In applying the LCM rule, the inventory of rehab supplies would be valued at:

A change from LIFO to any other inventory method is accounted for retrospectively.

Fad City sells novel clothes which are subject to a great deal of price volatility. A recent item which cost $20 was marked up $12, marked down for a sale by $6 and then had a markdown cancellation of $3. The latest selling price is:

To determine if an increase in the dollar value of inventory is due to increased quantities, using dollar-value LIFO retail:

In applying LCM, market cannot be:

The cost-to-retail percentage used in the retail method to approximate average costs considers both markdowns and markups.

On July 8, a fire destroyed the entire merchandise inventory on hand of Larrenaga Wholesale Corporation. The following information is available: What is the estimated inventory on July 8 immediately prior to the fire?

In applying LCM, market cannot be:

The average cost-to-retail percentage is:

Current period cost-to-retail percentage is:

The gross profit method and retail method are both ways of estimating ending inventory. Briefly explain how the two methods differ.

The conventional cost-to-retail percentage is:

Under the conventional retail method, which of the following are not included in the denominator of the current period cost-to-retail conversion percentage?

To use the dollar-value LIFO retail method for inventory, the second step is to determine the estimated:

To the nearest thousand, estimated ending inventory using the conventional retail method is:

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement and Statement of Cash Flows

Income Measurement

Time Value of Money Concepts

Cash and Receivables

Inventories: Measurement

Operational Assets: Acquisition and Disposition

Operational Assets: Utilization and Impairment

Investments

Current Liabilities and Contingencies

Bonds and Long-Term Notes

Leases

Accounting for Income Taxes

Pensions and Other Postretirement Benefits

Shareholders Equity

Share-Based Compensation and Earnings Per Share

Accounting Changes

The Statement of Cash Flows

Appendix a Derivatives

Filters