Question 1

Purchase returns and purchase discounts are ignored when computing cost-to-retail ratios for the retail method.

Accepted Answer

A) True 
 B)False

Question 2

In calculating the cost-to-retail percentage for the retail method, the retail column will not include:

Accepted Answer

A) Purchases. 
B) Purchase returns. 
C) Abnormal shortages. 
D) Freight-in. 
A) Purchases. 
B) Purchase returns. 
C) Abnormal shortages. 
D) Freight-in.

Question 3

Included in the computation of the cost-to-retail percentage for the LIFO retail method are:

Accepted Answer

A) Net markups and net markdowns. 
B) Neither net markups nor net markdowns. 
C) Net markups, but not net markdowns. 
D) Net markdowns, but not net markups. 
A) Net markups and net markdowns. 
B) Neither net markups nor net markdowns. 
C) Net markups, but not net markdowns. 
D) Net markdowns, but not net markups.

Question 4

The denominator for the current period's cost-to-retail percentage is:

Accepted Answer

A) $ 96,300. 
B) $ 73,300. 
C) $101,000. 
D) $ 81,500.$73,300 
A) $ 96,300. 
B) $ 73,300. 
C) $101,000. 
D) $ 81,500.$73,300

Question 5

Briefly outline the steps in the gross profit method of estimating ending inventory and indicate when the method might be used.

Accepted Answer

The gross profit method estimates cost o

Question 6

For a purchase commitment extending beyond the current fiscal year, if the market price on the purchase date declines from the previous year-end price, the purchase is recorded at the market price.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) Determine the estimated ending inventory at current year retail prices. 
B) Determine the estimated cost of goods sold for the current year. 
C) Determine the cost-to-retail percentage for the current year transactions. 
D) Price index adjust the LIFO inventory layers. 
A) Determine the estimated ending inventory at current year retail prices. 
B) Determine the estimated cost of goods sold for the current year. 
C) Determine the cost-to-retail percentage for the current year transactions. 
D) Price index adjust the LIFO inventory layers.

Question 8

New York Sales Inc. uses the conventional retail method to estimate its ending inventories. The following data has been summarized for December 31, 2009:
Required:
Compute the cost-to-retail percentage used by New York Sales Inc.
 $$\begin{array} { l c r } 
& \text { Cost } &{ \text { Retail } } \
\text { Inventory, January 1 } & & \$ 160,000 \
\text { Purchases } & & 538,000 \
\text { Net markups } & & 12,000 \
\text { Net markdowns } & & 9,100 \
\text { Net sales } & & 582,000 \
\text { Inventory, Dec. 31 } & \$ 77,285 &
\end{array}$$

Accepted Answer

Cost-to-retail perce

Question 9

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

Accepted Answer

A) $115. 
B) $90. 
C) $80. 
D) $69.$80 designated market value is less than $90 cost. 
A) $115. 
B) $90. 
C) $80. 
D) $69.$80 designated market value is less than $90 cost.

Question 10

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

Accepted Answer

A) $108,000. 
B) $ 90,000. 
C) $110,000. 
D) $115,000.$90,000 designated market value is less than $108,000 cost. 
A) $108,000. 
B) $ 90,000. 
C) $110,000. 
D) $115,000.$90,000 designated market value is less than $108,000 cost.

Question 11

Murdock Industries uses a periodic inventory system and the LIFO retail method to estimate its ending inventories. The following data has been summarized for December 31, 2009:
Required:
Estimate the LIFO cost of ending inventory. Assume stable retail prices during the period.
 $$\begin{array} { l c r } 
& \text { Cost } &  { \text { Retail } } \
\text { Inventory, January 1 } & \$ 116,000 & \$ 165,000 \
\text { Purchases } & 355,000 & 540,000 \
\text { Net markups } & & 15,600 \
\text { Net markdowns } & & 9,800 \
\text { Net sales } & & 522,000
\end{array}$$

Accepted Answer

The answer of Murdock Industries uses a periodic inventory system...

Question 12

For a change from the average cost method to FIFO, the current year's income includes the cumulative after-tax difference that would have resulted if the company had used FIFO in all prior years.

Accepted Answer

A) True 
 B)False

Question 13

Coastal Shores Inc. (CSI) was completely destroyed by Hurricane Fred on August 5, 2009. At January 1, CSI reported an inventory of $170,000. Sales from January 1, 2009, to August 5, 2009, totaled $480,000 and purchases totaled $195,000 during that time. CSI consistently marks up its products 60% over cost to arrive at a selling price. The estimated inventory loss due to Hurricane Fred would be:

Accepted Answer

A) $131,175. 
B) $ 65,000. 
C) $ 17,143. 
D) None of these is correct. 
A) $131,175. 
B) $ 65,000. 
C) $ 17,143. 
D) None of these is correct.

Question 14

Henderson Company uses the gross profit method to estimate ending inventory and cost of goods sold when preparing monthly financial statements required by its bank. Inventory on hand at the end of July was $122,500. The following information for the month of August was available from company records:
In addition, the controller is aware of $10,000 of inventory that was stolen during August from one of the company's warehouses.
Required:
1. Calculate the estimated inventory at the end of August, assuming a gross profit ratio of 30%
2. Calculate the estimated inventory at the end of August, assuming a markup on cost of 25%.

Accepted Answer

The answer of Henderson Company uses the gross profit method...

Question 15

For a purchase commitment contained within a single fiscal year, if the market price is less than the contract price, the purchase is recorded at the contract price.

Accepted Answer

A) True 
 B)False

Question 16

Littleton Company uses a periodic inventory system and the LIFO retail method to estimate its ending inventories. The following partial data has been summarized for December 31, 2009:
Required:
Determine the cost-to-retail percentage used by Littleton. Assume stable retail prices during the period.

Accepted Answer

Cost-to-retail perce

Question 17

Montana Co. has determined its year-end inventory on a FIFO basis to be $600,000. Information pertaining to that inventory is as follows: What should be the carrying value of Montana's inventory?

Accepted Answer

A) $600,000. 
B) $520,000. 
C) $590,000. 
D) $510,000. 
A) $600,000. 
B) $520,000. 
C) $590,000. 
D) $510,000.

Question 18

Estimated ending inventory at cost is:

Accepted Answer

A) $90,720. 
B) $83,920. 
C) $91,600. 
D) None of these is correct. 
A) $90,720. 
B) $83,920. 
C) $91,600. 
D) None of these is correct.

Question 19

Lacy's Linen Mart uses the retail method to estimate inventories. Data for the first six months of 2009 include: beginning inventory at cost and retail were $60,000 and $120,000, net purchases at cost and retail were $312,000 and $480,000, and sales during the first six months totaled $490,000. The estimated inventory at June 30, 2009, would be:

Accepted Answer

A) $ 68,200. 
B) $ 55,000. 
C) $ 71,500. 
D) $ 63,250. 
A) $ 68,200. 
B) $ 55,000. 
C) $ 71,500. 
D) $ 63,250.

Question 20

Harley Inc. uses the conventional retail method to estimate its ending inventories. The following data has been summarized for December 31, 2009:
Required:
Estimate the cost of ending inventory applying the conventional retail method.
 $$\begin{array} { l c r } 
& \text { Cost } &  { \text { Retail } } \
\text { Inventory, January 1 } & \$ 208,000 & \$ 280,000 \
\text { Purchases } & 470,000 & 610,000 \
\text { Net markups } & & 15,300 \
\text { Net markdowns } & & 11,200 \
\text { Normal spoilage } & & 4,600 \
\text { Net sales } & & 489,500
\end{array}$$

Accepted Answer

The answer of Harley Inc. uses the conventional retail method...

Purchase returns and purchase discounts are ignored when computing cost-to-retail ratios for the retail method.

In calculating the cost-to-retail percentage for the retail method, the retail column will not include:

Included in the computation of the cost-to-retail percentage for the LIFO retail method are:

The denominator for the current period's cost-to-retail percentage is:

Briefly outline the steps in the gross profit method of estimating ending inventory and indicate when the method might be used.

For a purchase commitment extending beyond the current fiscal year, if the market price on the purchase date declines from the previous year-end price, the purchase is recorded at the market price.

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

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

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

For a change from the average cost method to FIFO, the current year's income includes the cumulative after-tax difference that would have resulted if the company had used FIFO in all prior years.

For a purchase commitment contained within a single fiscal year, if the market price is less than the contract price, the purchase is recorded at the contract price.

Littleton Company uses a periodic inventory system and the LIFO retail method to estimate its ending inventories. The following partial data has been summarized for December 31, 2009: Required: Determine the cost-to-retail percentage used by Littleton. Assume stable retail prices during the period.

Montana Co. has determined its year-end inventory on a FIFO basis to be $600,000. Information pertaining to that inventory is as follows: What should be the carrying value of Montana's inventory?

Estimated ending inventory at cost 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

Purchase returns and purchase discounts are ignored when computing cost-to-retail ratios for the retail method.

In calculating the cost-to-retail percentage for the retail method, the retail column will not include:

Included in the computation of the cost-to-retail percentage for the LIFO retail method are:

The denominator for the current period's cost-to-retail percentage is:

Briefly outline the steps in the gross profit method of estimating ending inventory and indicate when the method might be used.

For a purchase commitment extending beyond the current fiscal year, if the market price on the purchase date declines from the previous year-end price, the purchase is recorded at the market price.

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

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

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

For a change from the average cost method to FIFO, the current year's income includes the cumulative after-tax difference that would have resulted if the company had used FIFO in all prior years.

For a purchase commitment contained within a single fiscal year, if the market price is less than the contract price, the purchase is recorded at the contract price.

Littleton Company uses a periodic inventory system and the LIFO retail method to estimate its ending inventories. The following partial data has been summarized for December 31, 2009: Required: Determine the cost-to-retail percentage used by Littleton. Assume stable retail prices during the period.

Montana Co. has determined its year-end inventory on a FIFO basis to be $600,000. Information pertaining to that inventory is as follows: What should be the carrying value of Montana's inventory?

Estimated ending inventory at cost 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