When applying the lower-of-cost-or-market rule, market should not be less than:
D) net realizable value less a normal profit margin
The following information pertains to one item of inventory of the Simon Company:
Per Unit
Cost $180
Replacement cost 150
Selling price 195
Disposal costs 5
Normal profit margin30
Applying the lower-of-cost-or-market rule, this item should be valued at:
C) $160
* Market = ($195 - $5) - $30 = $160
The gross profit method can be used in all of the following situations except:
B) In preparation of annual financial statements
The records of California Marine Products, Inc., revealed the following information related to inventory destroyed in an earthquake:
Inventory, beginning of period $300,000
Purchases to date of earthquake 160,000
Net sales to date of earthquake 450,000
Gross profit ratio 30%
The estimated amount of inventory destroyed by the earthquake is:
B) $145,000
* $300,000 (beginning balance) + $160,000 (purchases) - $315,000 (estimated cost of sales: $450,000 x 0.70)
The difference in the calculation of the cost-to-retail percentage applying the conventional retail method and the average cost method is that the average cost method:
B) includes markdowns
* The conventional retail method includes net markups, but excludes net markdowns. The average cost method includes both net markups and net markdowns.
The difference in the calculation of the cost-to-retail percentage applying the LIFO method and the average cost method is that the average cost method:
B) includes beginning inventory
* In the LIFO method, the cost-to-retail percentage is only compute on the current year's purchases
The Toso Company uses the retail inventory method. The following information is available for the year ended December 31, 2009:
Cost Retail
Inventory 1/1/09 $390,000 $650,000
Net purchases for the year 1,402,000 1,835,000
Net markups 75,000
Net markdowns 45,000
Net sales 1,845,000
Applying the conventional retail inventory method, Toso's inventory at December 31, 2009, is estimated at:
The Toso company uses the retail inventory method. The following information is available for the year ended December 31, 2009:
Cost Retail
Inventory 1/1/09 $ 390,000 $ 650,000
Net purchases for the year 1,402,000 1,835,000
Net markups 75,000
Net markdowns 45,000
Net sales 1,845,000
Applying the average cost retail inventory method, Toso's inventory at December 31, 2009, is estimated at:
The Toso company uses the retail inventory method. The following information is available for the year ended December 31, 2009:
Cost Retail
Inventory 1/1/09 $ 390,000 $ 650,000
Net purchases for the year 1,402,000 1,835,000
Net markups 75,000
Net markdowns 45,000
Net sales 1,845,000
Applying the LIFO retail inventory method, Toso's inventory at December 31, 2009, is estimated at:
Ending inventory at cost: $390,000 (beginning inventory at cost) + $15,035 ($20,000 x 75.17%)
The Toso company uses the retail inventory method. The following information is available for the year ended December 31, 2009:
Cost Retail
Inventory 1/1/09 $ 390,000 $ 650,000
Net purchases for the year 1,402,000 1,835,000
Net markups 75,000
Net markdowns 45,000
Net sales 1,845,000
Assume that 1/1/09 Toso adopted the dollar-value LIFO retail inventory method and that the retail price index at the end of 2009 is 1.02. Toso's inventory at December 31, 2009, is estimated at:
Ending inventory at cost: $390,000 (beginning inventory at cost) + $5,262 ($6,863 x 1.02 x 75.17%).
in 2009, the Robinson company switched its inventory method from FIFO to average cost. Inventories at the end of 2008 were reported in the balance sheet at $22 million. if the average cost method has been used, 2008 ending inventory would have been $20 million. The company's tax rate is 40%. The adjustment to 2009 beginning retained earnings would be:
A) a $1.2 million decrease in income
* Cost of goods sold would have been higher by $2 million, reducing pretax by $2 million. of that, taxes would have been reduced by $0.8 million, leaving a $1.2 million decrease in income.
In 2009, Robinson's ending inventory is $23 million using average cost, and would have been $26 million if the company had not switched from the FIFO method. The effect of the change in method on 2009 net income is a:
B) $600,000 decrease
* The average cost inventory increased by $3 million ($23 million - $20 million.) FIFO inventory would have increase by $4 million ($26 million - $22 million). Thus, cost of sales under average cost is $1 million greater than under FIFO. This reduces income before taxes by $1 million, and net income by $600,000
The Jackson Company incorrectly omitted $100,000 of merchandise from its 2009 ending inventory. In addition, a merchandise purchase of $40,000 was incorrectly recorded as a $4,000 debit to the purchases account. As a result of these errors, 2009 before-tax income is:
D) understated by $64,000
* By itself, the $100,000 omitted inventory would cause a cost-of-sals to be overstated (and income understated) $100,000. By itself, the misrecorded purchase would cause cost-of-sales to be understated (and income overstated) by $36,000. The net effect is to understate income by $64,000
To determine if an increase in the dollar value of inventory is due to increased quantities, using dollar-value LIFO retail:
D) Deflate the ending inventory amount to beginning of year prices and compare to the beginning inventory amount
Data related to the inventories of Hargrove Medical Supply is presented below:
In applying the LCM rule, the inventory of rehab supplies would be valued at:
D) $55
Clarabell Inc. uses the conventional retail method to estimate ending inventory. Cost data for the most recent quarter is shows below:
Cost Retail
Beginning inventory $112,000 $191,000
Net purchases 402,000 703,000
Net markups 43,000
Net markdowns 21,000
Net sales 685,000
The conventional cost-to-retail percentage is:
B) 54.9%
Clarabell Inc. uses the conventional retail method to estimate ending inventory. Cost data for the most re
cent quarter is shows below:
Cost Retail
Beginning inventory $112,000 $191,000
Net purchases 402,000 703,000
Net markups 43,000
Net markdowns 21,000
Net sales 685,000
To the nearest thousand, estimated ending inventory using the conventional retail method is:
D) $127,000
Data below for the year ended December 31, 2009 relates to Real Value Hardware. Real Value started January 1, 2009 and uses the LIFO retail method to estimate ending inventory:
Cost Retail
Beginning inventory $66,000 $104,000
Net purchases 287,100 459,600
Net markups 21,000
Net markdowns 40,000
Net sales 425,000
Current period cost-to-retail percentage is:
B) 65.2%
Data below for the year ended December 31, 2009 relates to Real Value Hardware. Real Value started January 1, 2009 and uses the LIFO retail method to estimate ending inventory:
Cost Retail
Beginning inventory $66,000 $104,000
Net purchases 287,100 459,600
Net markups 21,000
Net markdowns 40,000
Net sales 425,000
Estimated ending inventory at retail is:
B) 119,600
Data below for the year ended December 31, 2009 relates to Real Value Hardware. Real Value started January 1, 2009 and uses the LIFO retail method to estimate ending inventory:
Cost Retail
Beginning inventory $66,000 $104,000
Net purchases 287,100 459,600
Net markups 21,000
Net markdowns 40,000
Net sales 425,000
To the nearest thousand, estimated ending inventory at cost is:
A) $76,000
Author
seifera1
ID
17446
Card Set
acct ch 9 quiz
Description
Intermediate Accounting 5th Edition Spiceland chap 9 quiz