Question
1. When reporting inventory using the lower of cost or market, market should not be less than: a. Replacement cost. b. Net reliable value c.
1. When reporting inventory using the lower of cost or market, market should not be less than:
a. Replacement cost.
b. Net reliable value
c. selling price
d. net realizable value less normal profit margin
2. 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:
a. $325,000
b. $145,000
c. $10,000
d. All of these answer choice are incorrect
3. The Toso Company uses the retail inventory method. The following information is available for the year ended December 31, 2018:
Cost | Retail | ||||||
Inventory 1/1/2018 | $ | 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, 2018, is estimated at:
a. $477,392
b. $469,000
c. 395,159
d. $405,035
4. Montana Co. has determined its year-end inventory on a FIFO basis to be $634,000. Information pertaining to that inventory is as follows:
Selling price | $ | 610,000 | |
Costs to sell | 30,000 | ||
Replacement cost | 550,000 | ||
What should be the reported value of Montanas inventory?
a. $550,00
b. $580,000
c. 593,000
d. $ 610,000
5. Data related to the inventories of Costco Medical Supply are presented below:
Surgical | Surgical | Rehab | Rehab | ||||||||||||
Equipment | Supplies | Equipment | Supplies | ||||||||||||
Selling price | $ | 260 | $ | 100 | $ | 340 | $ | 165 | |||||||
Cost | 170 | 90 | 250 | 162 | |||||||||||
Costs to sell | 30 | 15 | 25 | 10 | |||||||||||
In applying the lower of cost or net realizable value rule, the inventory of surgical equipment would be valued at:
a. $230
b.$240
c. $170
d. $152
6. Data related to the inventories of Costco Medical Supply are presented below:
Surgical Equipment | Surgical Supplies | Rehab Equipment | Rehab Supplies | ||||||||||||
Selling price | $ | 268 | $ | 126 | $ | 335 | $ | 150 | |||||||
Cost | 165 | 100 | 285 | 147 | |||||||||||
Costs to sell | 11 | 11 | 33 | 10 | |||||||||||
In applying the lower of cost or net realizable value rule, the inventory of rehab equipment would be valued at:
a. $285
b. $270
c. $302
d. $225
7. Data related to the inventories of Alpine Ski Equipment and Supplies is presented below:
Skis | Boots | Apparel | Supplies | ||||||||||||
Selling price | $ | 177,000 | $ | 161,000 | $ | 113,000 | $ | 64,000 | |||||||
Cost | 137,000 | 137,000 | 73,450 | 44,800 | |||||||||||
Replacement cost | 135,000 | 112,000 | 93,450 | 40,800 | |||||||||||
Sales commission | 10 | % | 10 | % | 10 | % | 10 | % | |||||||
In applying the lower of cost or net realizable value rule, the inventory of skis would be valued at:
a. $115,050
b. $137,000
c. 159,300
d. $135,000
8. Data related to the inventories of Alpine Ski Equipment and Supplies is presented below:
Skis | Boots | Apparel | Supplies | ||||||||||||
Selling price | $ | 180,000 | $ | 140,000 | $ | 120,000 | $ | 60,000 | |||||||
Cost | 128,000 | 133,000 | 90,000 | 45,000 | |||||||||||
Replacement cost | 120,000 | 130,000 | 110,000 | 41,000 | |||||||||||
Sales commission | 10 | % | 10 | % | 10 | % | 10 | % | |||||||
In applying the lower of cost or net realizable value rule, the inventory of boots would be valued at:
a. $140,000
b. $133,000
c. $126,000
d. $130,000
9. Data below for the year ended December 31, 2018, relates to Houdini Inc. Houdini started business January 1, 2018, and uses the LIFO retail method to estimate ending inventory.
Cost | Retail | |||||
Beginning inventory | $ | 80,000 | $ | 117,000 | ||
Net purchases | 377,890 | 550,000 | ||||
Net markups | 33,000 | |||||
Net markdowns | 53,000 | |||||
Net sales | 492,000 | |||||
Estimated ending inventory at retail is:
a. $155,000
b. $38,000
c. $91,000
d. $204,910
10. Willie Nelson's Boots uses the conventional retail method to estimate ending inventory. Cost data for the most recent quarter is shown below:
Cost | Retail | |||||
Beginning inventory | $ | 49,000 | $ | 66,000 | ||
Net purchases | 157,000 | 221,000 | ||||
Net markups | 25,000 | |||||
Net markdowns | 38,000 | |||||
Net sales | 223,000 | |||||
The conventional cost-to-retail percentage (rounded) is:
a. 83.1%
b. 66.0%
c. 71.8%
d. 75.2%
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