Question 1

In applying the LCM rule, the inventory of surgical equipment would be valued at:

Accepted Answer

A) $230. 
B) $240. 
C) $170. 
D) $152.$170 designated cost is less than $230 designated market value. 
A) $230. 
B) $240. 
C) $170. 
D) $152.$170 designated cost is less than $230 designated market value.

Question 2

Briefly explain what is meant by "market" in the lower-of-cost-or-market (LCM) approach.

Accepted Answer

"Market" as used in the LCM rule is the

Question 3

Portman Inc. uses the conventional retail inventory method. Expressed in millions of dollars, information about Portman's 2009 inventory account is expressed in the table below: At what amount would Portman record its inventory on its 12/31/09 balance sheet?

Accepted Answer

A) $150 million 
B) $252 million 
C) $300 million 
D) None of these is correct. 
A) $150 million 
B) $252 million 
C) $300 million 
D) None of these is correct.

Question 4

In the following questions, inventory errors are noted for 2009. Assume that the errors are not discovered until 2010, and that the company uses a periodic inventory system. Indicate the effect of the error, if any, on the accounts noted in the columns, using the following code:
U = understated; O = Overstated; NE = No effect

-$$\begin{array} { | l | l | l | } 
\hline  { \text { Error } } & \text { Cost of goods sold } & \text { Retained earnings } \
\hline \begin{array} { l } 
\text { Ignored items purchased and owned } \
\text { that were still in transit. }
\end{array} & & \
\hline
\end{array}$$

Accepted Answer

Note: Both purchases

Question 5

Howard's Supply Co. suffered a fire loss on April 20, 2009. The company's last physical inventory was taken on January 30, 2009, at which time the inventory totaled $220,000. Sales from January 30 to April 20 were $600,000 and purchases during that time were $450,000. Howard's consistently reports a 30% gross profit. The estimated inventory loss is:

Accepted Answer

A) $490,000. 
B) $238,000. 
C) $250,000. 
D) None of these is correct. 
A) $490,000. 
B) $238,000. 
C) $250,000. 
D) None of these is correct.

Question 6

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

Accepted Answer

A) $162,000. 
B) $128,000. 
C) $120,000. 
D) $126,000.$126,000 designated market value is less than $128,000 cost. 
A) $162,000. 
B) $128,000. 
C) $120,000. 
D) $126,000.$126,000 designated market value is less than $128,000 cost.

Question 7

The primary motivation behind LCM is consistency.

Accepted Answer

A) True 
 B)False

Question 8

To determine the value of a LIFO layer, using dollar-value LIFO retail:

Accepted Answer

A) Divide the LIFO layer by the layer year price index and multiply by the layer year cost-to-retail percentage. 
B) Multiply the LIFO layer by the base year price index and the current year cost-to-retail percentage. 
C) Multiply the LIFO layer by the layer year price index and by the layer year cost-to-retail percentage. 
D) Divide the LIFO layer by the layer year cost-to-retail percentage and multiply by the layer year price index. 
A) Divide the LIFO layer by the layer year price index and multiply by the layer year cost-to-retail percentage. 
B) Multiply the LIFO layer by the base year price index and the current year cost-to-retail percentage. 
C) Multiply the LIFO layer by the layer year price index and by the layer year cost-to-retail percentage. 
D) Divide the LIFO layer by the layer year cost-to-retail percentage and multiply by the layer year price index.

Question 9

Prunedale Co. uses a periodic inventory system. Beginning inventory on January 1 was understated by $30,000, and its ending inventory on December 31 was understated by $17,000. In addition, a purchase of merchandise costing $20,000 was incorrectly recorded as a $2,000 purchase. None of these errors were discovered until the following year. As a result, Prunedale's cost of goods sold for this year was:

Accepted Answer

A) Overstated by $31,000. 
B) Overstated by $5,000. 
C) Understated by $31,000. 
D) Understated by $48,000.Understatement of beginning inventory understates ( ) cost of goods sold and the understatement of ending inventory overstates (+) cost of goods sold.Also, the understatement of purchases understates ( ) cost of goods sold: $30,000 + 17,000 18,000 ($20,000 2,000) = $31,000 understatement of cost of goods sold 
A) Overstated by $31,000. 
B) Overstated by $5,000. 
C) Understated by $31,000. 
D) Understated by $48,000.Understatement of beginning inventory understates ( ) cost of goods sold and the understatement of ending inventory overstates (+) cost of goods sold.Also, the understatement of purchases understates ( ) cost of goods sold: $30,000 + 17,000 18,000 ($20,000 2,000) = $31,000 understatement of cost of goods sold

Question 10

In the following questions, inventory errors are noted for 2009. Assume that the errors are not discovered until 2010, and that the company uses a periodic inventory system. Indicate the effect of the error, if any, on the accounts noted in the columns, using the following code:
U = understated; O = Overstated; NE = No effect

-$$\begin{array} { | c | c | c | } 
\hline \text { Error } & \text { Cost of goods sold } & \text { Retained earnings } \
\hline \text { Understated beginning inventory } & & \
\hline
\end{array}$$

Accepted Answer

The answer of  In the following questions, inventory errors...

Question 11

Briefly explain the financial reporting required when a company changes to or from the LIFO inventory method.

Accepted Answer

A change to the LIFO method simply requi

Question 12

Penfold's Paints uses the average cost retail method to estimate its ending inventories. The following data has been summarized for the year 2009:
Required:
Compute the cost-to-retail percentage used by Penfold's Paints.
 $\begin{array}{lr}& \text { Cost } & \text { Retail } \
\text { Inventory, January 1 } && \$ 65,000 \
\text { Purchases } && 270,000 \
\text { Net markups } && 3,600 \
\text { Net markdowns } && 2,100 \
\text { Net sales } && 260,000\\text { Inventory, December } 31& \$ 55,080
\end{array}$

Accepted Answer

Cost-to-retail perce

Question 13

When using the gross profit method to estimate ending inventory, it is not necessary to know:

Accepted Answer

A) Beginning inventory. 
B) Net purchases. 
C) Cost of goods sold. 
D) Net sales. 
A) Beginning inventory. 
B) Net purchases. 
C) Cost of goods sold. 
D) Net sales.

Question 14

Estimated ending inventory at retail is:

Accepted Answer

A) $ 65,000. 
B) $169,600. 
C) $ 25,000. 
D) $129,600. 
A) $ 65,000. 
B) $169,600. 
C) $ 25,000. 
D) $129,600.

Question 15

How much loss on purchase commitment will Johnson recognize in 2009?

Accepted Answer

A) $10,000. 
B) $20,000. 
C) $30,000. 
D) None.$200,000 - 180,000 = $20,000 loss 
A) $10,000. 
B) $20,000. 
C) $30,000. 
D) None.$200,000 - 180,000 = $20,000 loss

Question 16

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

Accepted Answer

A) $163,000. 
B) $124,000. 
C) $127,000. 
D) $136,000.127,000 
A) $163,000. 
B) $124,000. 
C) $127,000. 
D) $136,000.127,000

Question 17

To the nearest thousand, estimated ending inventory is:

Accepted Answer

A) $41,000. 
B) $37,000. 
C) $51,000. 
D) None of these is correct.The correct answer is $39,000 (rounded) 
A) $41,000. 
B) $37,000. 
C) $51,000. 
D) None of these is correct.The correct answer is $39,000 (rounded)

Question 18

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

Accepted Answer

A) $135,000. 
B) $133,000. 
C) $130,000. 
D) $105,000.$130,000 designated market value is less than $133,000 cost. 
A) $135,000. 
B) $133,000. 
C) $130,000. 
D) $105,000.$130,000 designated market value is less than $133,000 cost.

Question 19

Manila Bread Company uses the average cost retail method to estimate its ending inventories. The following data has been summarized for the year 2009:
Required:
Estimate the ending inventory as of December 31, 2009.
 $$\begin{array} { l c r } 
& \text { Cost } & \text { Retail } \
\text { Inventory, January 1 } & \$ 54,205 & \$ 78,000 \
\text { Purchases } & 326,000 & 466,000 \
\text { Net markups } & & 8,200 \
\text { Net markdowns } & & 16,700 \
\text { Net sales } & & 412,000
\end{array}$$

Accepted Answer

The answer of Manila Bread Company uses the average cost...

Question 20

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

Accepted Answer

A) Freight-in 
B) Purchase returns 
C) Purchases 
D) Net markdowns 
A) Freight-in 
B) Purchase returns 
C) Purchases 
D) Net markdowns

In applying the LCM rule, the inventory of surgical equipment would be valued at:

Briefly explain what is meant by "market" in the lower-of-cost-or-market (LCM) approach.

Portman Inc. uses the conventional retail inventory method. Expressed in millions of dollars, information about Portman's 2009 inventory account is expressed in the table below: At what amount would Portman record its inventory on its 12/31/09 balance sheet?

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

The primary motivation behind LCM is consistency.

To determine the value of a LIFO layer, using dollar-value LIFO retail:

Briefly explain the financial reporting required when a company changes to or from the LIFO inventory method.

When using the gross profit method to estimate ending inventory, it is not necessary to know:

Estimated ending inventory at retail is:

How much loss on purchase commitment will Johnson recognize in 2009?

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

To the nearest thousand, estimated ending inventory is:

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

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

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

In applying the LCM rule, the inventory of surgical equipment would be valued at:

Briefly explain what is meant by "market" in the lower-of-cost-or-market (LCM) approach.

Portman Inc. uses the conventional retail inventory method. Expressed in millions of dollars, information about Portman's 2009 inventory account is expressed in the table below: At what amount would Portman record its inventory on its 12/31/09 balance sheet?

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

The primary motivation behind LCM is consistency.

To determine the value of a LIFO layer, using dollar-value LIFO retail:

Briefly explain the financial reporting required when a company changes to or from the LIFO inventory method.

When using the gross profit method to estimate ending inventory, it is not necessary to know:

Estimated ending inventory at retail is:

How much loss on purchase commitment will Johnson recognize in 2009?

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

To the nearest thousand, estimated ending inventory is:

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

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

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