QUESTION 6

1. Applying LCM, ABC Company determines that, as of December 31, merchandise that originally cost $46,300 is now $43,500 at market. This is a temporary decline due to the seasonal nature of the merchandise. ABC Company should:
2. make no entry
3. make an entry to increase cost of goods sold
4. make an entry to decrease the inventory account
5. make an entry to reduce retained earnings

2 points  

QUESTION 7

1. ACME Company purchases for resale 1,000 widgets for $38 each. At year end, the replacement cost is $37 per widget, the estimated selling price is $63 per widget, the disposal cost is $8 per widget, and the estimated markup is $15 per widget. If ACME uses LCM costing by item, at what amount will the widgets be reported on the balance sheet?
2. $39,000
3. $37,000
4. $55,000
5. $40,000
6. $38,000

2 points  

QUESTION 8

1. ACME Company purchases for resale 1,000 widgets for $64 each. At year end, the replacement cost is $63 per widget, the estimated selling price is $68 per widget, the disposal cost is $7 per widget, and the estimated markup is $10 per widget. If ACME uses LCM costing by item, at what amount will the widgets be reported on the balance sheet?
2. $63,000
3. $51,000
4. $64,000
5. $62,500
6. $61,000

2 points  

QUESTION 9

1. Lower of Cost or Market (LCM) can be applied by item, by group, or by the inventory as a whole. Whichever method is chosen must be used year after year.
2.  True
3.  False