Problem E (24 points) FILL-IN-THE-BLANK PRINCIPLES AND TERMINOLOGY- INSTRUCTIONS: Complete each of the following statements by w riting the appropriate words in the Answers column. For Scoring Answers STATEMENTS 0. In which section of the balance sheet is merchandise inventory reported? current assets 1-3. Would a perpetual inventory system normally be practical for the following types of businesses without a computerized system? (answer yes or no) 1. Retail jewelry store.. 2. Wholesale clothing store 3. Retail candy store.. 1. 2. 3. If the cost of an item of inventory is $75, the current replacement cost is $64, and the selling price is $95, the amount included in inventory according to the lower of cost or market concept is 5. Merchandise in transit should not be included in the seller's inventory 5. if the terms are FOB The inventory method where the last units purchased are assumed to be sold and the ending inventory is made up of the first units 6. 6. A method that is useful for estimating the cost of inventory that has been destroyed that uses the relationship between cost and retail value is 7. 7 During a period of consistently falling prices, the method (FIFO or LIFO) that wil result in reporting the greater cost of merchandise sold 8. is. Inventory at the end of the current fiscal year was understated. State whether each of the following will be overstated, understated, or not affected: Cost of merchandise sold reported on the income statement for the current year. 9-11. 9. 10. Net income reported on the income statement for the current year 11. Retained earnings reported on the balance sheet at the end of the 10. current year. Damaged merchandise that can only be sold at below cost should be 12. 12. Problem E (24 points) FILL-IN-THE-BLANK PRINCIPLES AND TERMINOLOGY- INSTRUCTIONS: Complete each of the following statements by w riting the appropriate words in the Answers column. For Scoring Answers STATEMENTS 0. In which section of the balance sheet is merchandise inventory reported? current assets 1-3. Would a perpetual inventory system normally be practical for the following types of businesses without a computerized system? (answer yes or no) 1. Retail jewelry store.. 2. Wholesale clothing store 3. Retail candy store.. 1. 2. 3. If the cost of an item of inventory is $75, the current replacement cost is $64, and the selling price is $95, the amount included in inventory according to the lower of cost or market concept is 5. Merchandise in transit should not be included in the seller's inventory 5. if the terms are FOB The inventory method where the last units purchased are assumed to be sold and the ending inventory is made up of the first units 6. 6. A method that is useful for estimating the cost of inventory that has been destroyed that uses the relationship between cost and retail value is 7. 7 During a period of consistently falling prices, the method (FIFO or LIFO) that wil result in reporting the greater cost of merchandise sold 8. is. Inventory at the end of the current fiscal year was understated. State whether each of the following will be overstated, understated, or not affected: Cost of merchandise sold reported on the income statement for the current year. 9-11. 9. 10. Net income reported on the income statement for the current year 11. Retained earnings reported on the balance sheet at the end of the 10. current year. Damaged merchandise that can only be sold at below cost should be 12. 12
