Question 1

The cost-to-retail percentage used in the retail method to approximate average cost incorporates both markdowns and markups.

Accepted Answer

A) True 
 B)False

Question 2

Data related to the inventories of Costco Medical Supply are presented below: $$\begin{array} { l c c c r } 
& \text { Surgical } & \text { Surgical } & \text { Rehab } & \text { Rehab } \
& \text { Equiprnent } & \text { Supplies } & \text { Equipment } & \text { Supplies } \
\text { Selling price } & \$ 260 & \$ 100 & \$ 340 & \$ 165 \
\text { Cost } & 170 & 90 & 250 & 162 \
\text { Costs to sell } & 30 & 15 & 25 & 10
\end{array}$$
- In applying the lower of cost or net realizable value rule, the inventory of surgical supplies would be valued at:

Accepted Answer

A)  $100. 
B)  $90. 
C)  $85. 
D)  $75. 
A)  $100. 
B)  $90. 
C)  $85. 
D)  $75.

Question 3

Data related to the inventories of Kimzey Medical Supply are presented below:  
- In applying the lower of cost or market rule, the inventory of rehab equipment would be valued at:

Accepted Answer

A)  $315. 
B)  $247. 
C)  $150. 
D)  $235. 
A)  $315. 
B)  $247. 
C)  $150. 
D)  $235.

Question 4

For companies that use LIFO, inventory is valued at the lower of cost or net realizable value at the end of the reporting period.

Accepted Answer

A) True 
 B)False

Question 5

Billingsly Products uses the conventional retail method to estimate its ending inventories. The following data has been summarized for the year 2018:   Required:
Estimate the ending inventory as of December 31, 2018.

Accepted Answer

The answer of Billingsly Products uses the conventional retail method...

Question 6

Data related to the inventories of Alpine Ski Equipment and Supplies is presented below:   
-In applying the lower of cost or net realizable value rule, the inventory of apparel would be valued at:

Accepted Answer

A)  $108,000. 
B)  $90,000. 
C)  $110,000. 
D)  $99,000. 
A)  $108,000. 
B)  $90,000. 
C)  $110,000. 
D)  $99,000.

Question 7

Data related to the inventories of Alpine Ski Equipment and Supplies is presented below:  
- In applying the lower of cost or net realizable value rule, the inventory of boots would be valued at:

Accepted Answer

A)  $140,000. 
B)  $133,000. 
C)  $126,000. 
D)  $130,000. 
A)  $140,000. 
B)  $133,000. 
C)  $126,000. 
D)  $130,000.

Question 8

Novelli's Nursery has developed the following data for lower of cost or market for its products. The individual types of trees are separated as to their categories:
 
The costs to sell are 10% of the selling price, and the normal profit margin on all trees is 20% of the selling price. 
-Required: Determine the reported inventory value assuming the lower of cost or market rule is applied to individual tree products.

Accepted Answer

The answer of Novelli's Nursery has developed the following data...

Question 9

Masterlink Co., in applying the lower of cost or market method, reports its inventory at net realizable value. Which of the following statements is correct?

Accepted Answer

A)  NRV is greater than replacement cost. 
B)  Cost is less than net realizable value. 
C)  Cost is greater than net realizable value. 
D)  Cost is less than NRV minus a normal profit margin. 
A)  NRV is greater than replacement cost. 
B)  Cost is less than net realizable value. 
C)  Cost is greater than net realizable value. 
D)  Cost is less than NRV minus a normal profit margin.

Question 10

Trask Inc. uses the average cost retail method to estimate its ending inventory. Partial information at June 30, 2018, is as follows:   Required:
Assuming Trask's cost-to-retail = 60%, compute Trask's beginning inventory at retail.

Accepted Answer

The answer of Trask Inc. uses the average cost retail...

Question 11

Madison Co. has determined its year-end inventory on a LIFO basis to be $600,000. Information pertaining to that inventory is as follows:   What should be the reported value of Madison's inventory?

Accepted Answer

A)  $600,000. 
B)  $620,000. 
C)  $690,000. 
D)  $610,000. 
A)  $600,000. 
B)  $620,000. 
C)  $690,000. 
D)  $610,000.

Question 12

In 2018, the internal auditors of Blooper Inc. discovered that goods costing $12 million that were shipped f.o.b. shipping point in December of 2017 were in transit on December 31. The goods were recorded as a purchase in December of 2017 but were not included in the 2017 year-end inventory.
Required:
Prepare the journal entry needed in 2018 to correct the error. Also, briefly describe any other measures Blooper would take in connection with correcting the error. (Ignore income taxes.)

Accepted Answer

@#IMG-DLM& @#IMG-DLM& ($ in millions)
Inventory 12
Retained

Question 13

Novelli's Nursery has developed the following data in order to calculate the lower of cost or net realizable value for its products. The individual products are listed within the categories of trees.

The costs to sell are 10% of selling price. 
-Required: Determine the reported inventory value assuming the lower of cost or net realizable value rule is applied to individual trees.

Accepted Answer

The answer of Novelli's Nursery has developed the following data...

Question 14

Under the conventional retail method, the denominator in the cost-to-retail percentage includes:

Accepted Answer

A)  Net markups and net markdowns. 
B)  Neither net markups nor net markdowns. 
C)  Net markups, but not net markdowns. 
D)  Net markdowns, but not net markups. 
A)  Net markups and net markdowns. 
B)  Neither net markups nor net markdowns. 
C)  Net markups, but not net markdowns. 
D)  Net markdowns, but not net markups.

Question 15

Briefly explain the difference between the LIFO retail method and the dollar-value LIFO retail method.

Accepted Answer

Dollar-value LIFO retail eliminates the

Question 16

Briefly explain the financial reporting required when a company changes to or from the LIFO inventory method.

Accepted Answer

A change to the LIFO method simply requi

Question 17

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

-$$\begin{array} { | l | l | l | } 
\hline  { \text { Eiror } } & \text { Cost of goods sold } & \text { Retained earnings } \
\hline \text { The company ignored its purchase of } & & \
\text { inventory that was bought FOB shipping point } & & \
\text { and was in transit at year end } & & \
\hline
\end{array}$$

Accepted Answer

@#IMG-DLM& Note: Both purchase

Question 18

When using the gross profit method to estimate ending inventory, it is not necessary to know:

Accepted Answer

A)  Beginning inventory. 
B)  Net purchases. 
C)  Cost of goods sold. 
D)  Net sales. 
A)  Beginning inventory. 
B)  Net purchases. 
C)  Cost of goods sold. 
D)  Net sales.

Question 19

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:   The average cost-to-retail percentage is:

Accepted Answer

A)  52.2%. 
B)  61.5%. 
C)  56.8%. 
D)  55%. 
A)  52.2%. 
B)  61.5%. 
C)  56.8%. 
D)  55%.

Question 20

Data related to the inventories of Kimzey Medical Supply are presented below:  
- In applying the lower of cost or market rule, the inventory of rehab supplies would be valued at:

Accepted Answer

A)  $122. 
B)  $158. 
C)  $162. 
D)  $155. 
A)  $122. 
B)  $158. 
C)  $162. 
D)  $155.

The cost-to-retail percentage used in the retail method to approximate average cost incorporates both markdowns and markups.

Data related to the inventories of Kimzey Medical Supply are presented below: - In applying the lower of cost or market rule, the inventory of rehab equipment would be valued at:

For companies that use LIFO, inventory is valued at the lower of cost or net realizable value at the end of the reporting period.

Billingsly Products uses the conventional retail method to estimate its ending inventories. The following data has been summarized for the year 2018: Required: Estimate the ending inventory as of December 31, 2018.

Data related to the inventories of Alpine Ski Equipment and Supplies is presented below: -In applying the lower of cost or net realizable value rule, the inventory of apparel would be valued at:

Data related to the inventories of Alpine Ski Equipment and Supplies is presented below: - In applying the lower of cost or net realizable value rule, the inventory of boots would be valued at:

Masterlink Co., in applying the lower of cost or market method, reports its inventory at net realizable value. Which of the following statements is correct?

Trask Inc. uses the average cost retail method to estimate its ending inventory. Partial information at June 30, 2018, is as follows: Required: Assuming Trask's cost-to-retail = 60%, compute Trask's beginning inventory at retail.

Madison Co. has determined its year-end inventory on a LIFO basis to be $600,000. Information pertaining to that inventory is as follows: What should be the reported value of Madison's inventory?

Under the conventional retail method, the denominator in the cost-to-retail percentage includes:

Briefly explain the difference between the LIFO retail method and the dollar-value LIFO retail method.

Briefly explain the financial reporting required when a company changes to or from the LIFO inventory method.

When using the gross profit method to estimate ending inventory, it is not necessary to know:

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: The average cost-to-retail percentage is:

Data related to the inventories of Kimzey Medical Supply are presented below: - In applying the lower of cost or market rule, the inventory of rehab supplies would be valued at:

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 cost-to-retail percentage used in the retail method to approximate average cost incorporates both markdowns and markups.

Data related to the inventories of Kimzey Medical Supply are presented below: - In applying the lower of cost or market rule, the inventory of rehab equipment would be valued at:

For companies that use LIFO, inventory is valued at the lower of cost or net realizable value at the end of the reporting period.

Billingsly Products uses the conventional retail method to estimate its ending inventories. The following data has been summarized for the year 2018: Required: Estimate the ending inventory as of December 31, 2018.

Data related to the inventories of Alpine Ski Equipment and Supplies is presented below: -In applying the lower of cost or net realizable value rule, the inventory of apparel would be valued at:

Data related to the inventories of Alpine Ski Equipment and Supplies is presented below: - In applying the lower of cost or net realizable value rule, the inventory of boots would be valued at:

Masterlink Co., in applying the lower of cost or market method, reports its inventory at net realizable value. Which of the following statements is correct?

Trask Inc. uses the average cost retail method to estimate its ending inventory. Partial information at June 30, 2018, is as follows: Required: Assuming Trask's cost-to-retail = 60%, compute Trask's beginning inventory at retail.

Madison Co. has determined its year-end inventory on a LIFO basis to be $600,000. Information pertaining to that inventory is as follows: What should be the reported value of Madison's inventory?

Under the conventional retail method, the denominator in the cost-to-retail percentage includes:

Briefly explain the difference between the LIFO retail method and the dollar-value LIFO retail method.

Briefly explain the financial reporting required when a company changes to or from the LIFO inventory method.

When using the gross profit method to estimate ending inventory, it is not necessary to know:

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: The average cost-to-retail percentage is:

Data related to the inventories of Kimzey Medical Supply are presented below: - In applying the lower of cost or market rule, the inventory of rehab supplies would be valued at:

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