Chapter 8 - Accounting for Inventories

q1: If the cost to retail percentage for a firm using the retail method was 70% and the cost value of the inventory was estimated to be $21, then the retail (selling value) value of the inventory would be

a. $21

b. $35

c. $30

d. Is not determinable from the information provided

e. Some other amount

q2: Albany Addictive Apples counted and valued its inventory using FIFO on December 31, 2013 and on December 31, 2014 and reported the calculated values on each respective balance sheet. Albany Additive Apples had zero consignment inventory on hand at December 31, 2014 and had some consignment on hand at December 31, 2013. If consignment inventory had erroneously been counted and included in inventory in the December 31, 2013 count, which of the following is true?

a. Net income was understated in 2013

b. Net income was understated in 2014

c. The company should not have used FIFO and should restate both years balance sheets and income statements

d. Inventory was understated at December 31, 2014

e. Inventory was understated at December 31, 2013

q3: If a company uses the FIFO Method of valuing its inventory, this requires that:

a. It actually sells its oldest inventory first

b. It charges the costs associated with its most recently acquired inventory to Cost of Sales first

c. None of the above are correct statements

d. It actually sells its most recently acquired inventory first

e. It charges the costs associated with its oldest inventory to Cost of Sales first

q4:

Hammer Co. is in the business of buying hammers at wholesale prices and reselling them at retail prices. The following information for the month of February was collected by Hammer Co.'s Purchase and Sales departments: ransactions Units Unit cost/sales price Feb 4 Beginning inventory $15 18 Ifthe company uses a LIFO periodic inventory system, what was the cost ofthe inventory on hand after the February 26m sale and the Cost of Goods Sold for February? 0 Inventory on Hand $1,950 Cost of Goods Sold $7,350" 0 None of the other alternatives are correct 0 Inventory on Hand $1,950 Cost of Goods Sold $7,100 0 Inventory on Hand $2,200 Cost of Goods Sold $7,350 0 Inventory on Hand $2,200 Cost of Goods Sold $7,100