Question 1

The first step, when using dollar-value LIFO retail method for inventory, is to:

Accepted Answer

A)  Determine the estimated ending inventory at current year retail prices. 
B)  Determine the estimated cost of goods sold for the current year. 
C)  Determine the cost-to-retail percentage for the current year transactions. 
D)  Price index adjust the LIFO inventory layers. 
A)  Determine the estimated ending inventory at current year retail prices. 
B)  Determine the estimated cost of goods sold for the current year. 
C)  Determine the cost-to-retail percentage for the current year transactions. 
D)  Price index adjust the LIFO inventory layers.

Question 2

For a purchase commitment extending beyond the current fiscal year, if the market price on the purchase date declines from the previous year-end price, the purchase is recorded at the market price.

Accepted Answer

A) True 
 B)False

Question 3

Ramsgate Company has used the FIFO method for inventory valuation since it began business in 2014, but has elected to change to the average cost method starting in 2017. Year-end inventory valuations under each method are shown below:   Required:
How, and when, would Ramsgate reflect the change in accounting principle in its financial statements (ignore income taxes)?

Accepted Answer

Ramsgate would revise prior years' finan

Question 4

Zanesville Pots Co. uses the conventional retail method to estimate ending inventories. The following data has been summarized for the year ended December 31, 2018:   Required:
Estimate the cost of ending inventory applying the conventional retail method.

Accepted Answer

The answer of Zanesville Pots Co. uses the conventional retail...

Question 5

Which of the following would not require the company to account for the change retrospectively?

Accepted Answer

A)  From average cot to FIFO. 
B)  From FIFO to LIFO. 
C)  From LIFO to FIFO. 
D)  From LIFO to average cost. 
A)  From average cot to FIFO. 
B)  From FIFO to LIFO. 
C)  From LIFO to FIFO. 
D)  From LIFO to average cost.

Question 6

The conventional retail inventory method is based on:

Accepted Answer

A)  Average cost. 
B)  LIFO cost. 
C)  Average, lower of cost or net realizable value. 
D)  LIFO, lower of cost or net realizable value. 
A)  Average cost. 
B)  LIFO cost. 
C)  Average, lower of cost or net realizable value. 
D)  LIFO, lower of cost or net realizable value.

Question 7

Cornhusker Can Co. uses the conventional retail method to estimate ending inventories. The following data has been summarized for year ended December 31, 2018:   Required:
Estimate the cost of ending inventory applying the conventional retail method. Assume that sales are recorded net of employee discounts.

Accepted Answer

The answer of Cornhusker Can Co. uses the conventional retail...

Question 8

On July 5, 2018, a fire destroyed the entire inventory of Kinard Music Mart. The following information is available from its accounting records: $$\begin{array} { | l | r | } 
\hline \text { Inventory, January 1, 2018 } & \$ 211,000 \
\hline \text { Purchases, Jan. 1 - July 5 } & 500,000 \
\hline \text { Sales, Jan. 1 - July } 5 & 900,000 \
\hline \text { Normal gross margin } & 30 \% \
\hline
\end{array}$$ Required:
Compute the estimated cost of inventory lost in the fire.

Accepted Answer

Gross Prof

Question 9

Haskell Corporation has determined its year-end inventory on a FIFO basis to be $785,000. Information pertaining to that inventory is as follows: $$\begin{array} { l r } 
\text { Selling price } & \$ 805,000 \
\text { Costs to sell } & 35,000 \
\text { Replacement cost } & 765,000
\end{array}$$ What should be the reported value of Haskell's inventory if the company prepares its financial statements according to International Financial Reporting Standards (IFRS)?

Accepted Answer

A)  $765,000. 
B)  $785,000. 
C)  $770,000. 
D)  $750,000. 
A)  $765,000. 
B)  $785,000. 
C)  $770,000. 
D)  $750,000.

Question 10

In the following questions, inventory errors are noted for 2018. Assume that the errors are not discovered until 2019, and that the company uses a periodic inventory system. Indicate the effect of the error, if any, on the accounts noted in the columns, using the following code:
U = Understated; O = Overstated; NE = No effect

-$$\begin{array} { | c | c | c | } 
\hline \text { Error } & \text { Cost of goods sold } & \text { Retained earnings } \
\hline \text { Double counted items in ending inventory } & & \
\hline
\end{array}$$

Accepted Answer

The answer of In the following questions, inventory errors are...

Question 11

Marilee's Electronics uses a periodic inventory system and the average cost retail method to estimate ending inventory and cost of goods sold. The following data is available from the company records for the month of June 2018:   To the nearest thousand, estimated ending inventory is:

Accepted Answer

A)  $55,000. 
B)  $52,000. 
C)  $57,000. 
D)  None of these answer choices are correct. 
A)  $55,000. 
B)  $52,000. 
C)  $57,000. 
D)  None of these answer choices are correct.

Question 12

The market value for purposes of using the lower of cost or market (LCM) method is defined as replacement cost, subject to a ceiling and a floor.

Accepted Answer

A) True 
 B)False

Question 13

In applying LCM, market cannot be:

Accepted Answer

A)  Less than net realizable value minus a normal profit margin. 
B)  Net realizable value less reasonable completion and disposal costs. 
C)  Greater than net realizable value reduced by an allowance for normal profit margin. 
D)  Less than cost. 
A)  Less than net realizable value minus a normal profit margin. 
B)  Net realizable value less reasonable completion and disposal costs. 
C)  Greater than net realizable value reduced by an allowance for normal profit margin. 
D)  Less than cost.

Question 14

Weldon Animal Feeds has developed the following data in order to calculate the lower of cost or net realizable value for its products (in thousands). The products are listed within their category of feed product.
 
The costs to sell are 20% of selling price. 
-Required: Determine the reported inventory value assuming the lower of cost or net realizable value rule is applied to individual types of feeds.

Accepted Answer

The answer of Weldon Animal Feeds has developed the following...

Question 15

In applying LCM, market cannot be:

Accepted Answer

A)  Less than net realizable value. 
B)  Greater than the normal profit. 
C)  Less than the normal profit margin. 
D)  Greater than net realizable value. 
A)  Less than net realizable value. 
B)  Greater than the normal profit. 
C)  Less than the normal profit margin. 
D)  Greater than net realizable value.

Question 16

Purchase returns and purchase discounts are ignored when computing cost-to-retail ratios for the retail method.

Accepted Answer

A) True 
 B)False

Question 17

Data related to the inventories of Mountain Ski Equipment and Supplies is presented below:   
-In applying the lower of cost or market rule, the inventory of supplies would be valued at:

Accepted Answer

A)  $45,000. 
B)  $54,000. 
C)  $50,000. 
D)  $48,000. 
A)  $45,000. 
B)  $54,000. 
C)  $50,000. 
D)  $48,000.

Question 18

Under the LIFO retail method, the current period cost-to-retail percentage includes both net markdowns and net markups.

Accepted Answer

A) True 
 B)False

Question 19

The primary motivation behind the lower of cost or market (LCM) rule is conservatism.

Accepted Answer

A) True 
 B)False

Question 20

Weldon Animal Feeds has developed the following data in order to calculate the lower of cost or net realizable value for its products (in thousands). The products are listed within their category of feed product.
 
The costs to sell are 20% of selling price. 
-Required: Determine the reported inventory value assuming the lower of cost or net realizable value rule is applied to categories of feeds.

Accepted Answer

The first step, when using dollar-value LIFO retail method for inventory, is to:

For a purchase commitment extending beyond the current fiscal year, if the market price on the purchase date declines from the previous year-end price, the purchase is recorded at the market price.

Zanesville Pots Co. uses the conventional retail method to estimate ending inventories. The following data has been summarized for the year ended December 31, 2018: Required: Estimate the cost of ending inventory applying the conventional retail method.

Which of the following would not require the company to account for the change retrospectively?

The conventional retail inventory method is based on:

Marilee's Electronics uses a periodic inventory system and the average cost retail method to estimate ending inventory and cost of goods sold. The following data is available from the company records for the month of June 2018: To the nearest thousand, estimated ending inventory is:

The market value for purposes of using the lower of cost or market (LCM) method is defined as replacement cost, subject to a ceiling and a floor.

In applying LCM, market cannot be:

In applying LCM, market cannot be:

Purchase returns and purchase discounts are ignored when computing cost-to-retail ratios for the retail method.

Data related to the inventories of Mountain Ski Equipment and Supplies is presented below: -In applying the lower of cost or market rule, the inventory of supplies would be valued at:

Under the LIFO retail method, the current period cost-to-retail percentage includes both net markdowns and net markups.

The primary motivation behind the lower of cost or market (LCM) rule is conservatism.

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement, Comprehensive Income, and the Statement of Cash Flows

Revenue Recognition

Time Value of Money Concepts

Cash and Receivables

Inventories: Measurement

Property, Plant, and Equipment and Intangible Assets: Acquisition

Property, Plant, and Equipment and Intangible Assets: Utilization and Disposition

Investments

Current Liabilities and Contingencies

Bonds and Long-Term Notes

Leases

Accounting for Income Taxes

Pensions and Other Postretirement Benefits

Shareholders Equity

Share-Based Compensation and Earnings Per Share

Accounting Changes and Error Corrections

The Statement of Cash Flows Revisited

Filters

Exam 9: Inventories: Additional Issues

The first step, when using dollar-value LIFO retail method for inventory, is to:

For a purchase commitment extending beyond the current fiscal year, if the market price on the purchase date declines from the previous year-end price, the purchase is recorded at the market price.

Zanesville Pots Co. uses the conventional retail method to estimate ending inventories. The following data has been summarized for the year ended December 31, 2018: Required: Estimate the cost of ending inventory applying the conventional retail method.

Which of the following would not require the company to account for the change retrospectively?

The conventional retail inventory method is based on:

Marilee's Electronics uses a periodic inventory system and the average cost retail method to estimate ending inventory and cost of goods sold. The following data is available from the company records for the month of June 2018: To the nearest thousand, estimated ending inventory is:

The market value for purposes of using the lower of cost or market (LCM) method is defined as replacement cost, subject to a ceiling and a floor.

In applying LCM, market cannot be:

In applying LCM, market cannot be:

Purchase returns and purchase discounts are ignored when computing cost-to-retail ratios for the retail method.

Data related to the inventories of Mountain Ski Equipment and Supplies is presented below: -In applying the lower of cost or market rule, the inventory of supplies would be valued at:

Under the LIFO retail method, the current period cost-to-retail percentage includes both net markdowns and net markups.

The primary motivation behind the lower of cost or market (LCM) rule is conservatism.

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement, Comprehensive Income, and the Statement of Cash Flows

Revenue Recognition

Time Value of Money Concepts

Cash and Receivables

Inventories: Measurement

Property, Plant, and Equipment and Intangible Assets: Acquisition

Property, Plant, and Equipment and Intangible Assets: Utilization and Disposition

Investments

Current Liabilities and Contingencies

Bonds and Long-Term Notes

Leases

Accounting for Income Taxes

Pensions and Other Postretirement Benefits

Shareholders Equity

Share-Based Compensation and Earnings Per Share

Accounting Changes and Error Corrections

The Statement of Cash Flows Revisited

Filters