You are watching: How is the gross profit method used as it relates to inventory valuation?
When inventory declines in worth listed below original (historical) price, and also this decline is taken into consideration other than momentary, what is the maximum amount that the inventory have the right to be valued at?a. Sales priceb. Net realizable valuec. Historical costd. Net realizable worth reduced by a normal profit margin
Inventory may be videotaped at net realizable worth ifa. tbelow is a regulated sector with a quoted price.b. there are no considerable expenses of disposal.c. the inventory consists of valuable metals or agricultural commodities.d. every one of these.
The credit balance that arises when a net loss on a purchase commitment is known need to bea. presented as a current licapability.b. subtracted from finishing inventory.c. presented as an appropriation of preserved earnings.d. presented in the income statement.
At the finish of the fiscal year, Apha Airlines has an outstanding non-cancellable purchase commitment for the purchase of 1 million gallons of jet fuel at a price of $4.10 per gallon for delivery throughout the coming summer. The agency prices its inventory at the reduced of expense or market. If the market price for jet fuel at the end of the year is $4.50, just how would this instance be reflected in the annual financial statements?a. Record unrealized gains of $400,000 and disclose the existence of the purchase commitment.b. No affect.c. Record unrealized losses of $400,000 and also discshed the visibility of the purchase commitment.d. Discshed the existence of the purchase commitment.
How is the gross profit approach offered as it relates to inventory valuation?a. Verify the accuracy of the perpetual inventory records.b. Verity the accuracy of the physical inventory.c. To estimate price of products offered.d. To administer an inventory value of LIFO inventories.
Which of the following is not an easy assumption of the gross profit method?a. The start inventory plus the purchases equal complete products to be accounted for.b. Goods not offered need to be on hand also.c. If the sales, diminished to the cost basis, are deducted from the sum of the opening inventory plus purchases, the result is the amount of inventory on hand also.d. The complete amount of purchases and the total amount of sales remain relatively unreadjusted from the similar previous period.
d. the complete amount of purchases and the total amount of sales reprimary reasonably unadjusted from the similar previous period
Which statement is not true about the gross profit technique of inventory valuation?a. It may be offered to estimate inventories for interim statements.b. It might be offered to estimate inventories for annual statements.c. It might be offered by auditors.d. Namong these.
A major benefit of the retail inventory approach is that ita. gives reputable results in instances wbelow the distribution of items in the inventory is various from that of items marketed in the time of the period.b. hides expenses from competitors and also customers.c. offers an extra accurate statement of inventory costs than various other approaches.d. offers a method for inventory regulate and facilitates determicountry of the regular inventory for particular forms of providers.
d. proves an approach for inventory manage and also facilitates determicountry of the regular inventory for particular types of companies
An inventory approach which is designed to approximate inventory valuation at the reduced of expense or industry isa. last-in, first-out.b. first-in, first-out.c. traditional retail strategy.d. particular identification.
The retail inventory method is based on the presumption that thea. final inventory and the total of products accessible for sale contain the very same propercentage of high-cost and also low-price ratio items.b. ratio of gross margin to sales is around the exact same each period.c. ratio of expense to retail alters at a constant rate.d. proparts of markups and also markdowns to marketing price are the exact same.
a. final inventory and also the total of goods obtainable for sale contain the exact same propercentage of high price and low expense ratio goods
When the standard retail inventory technique is used, markdowns are frequently ignored in the computation of the price to retail proportion becausea. there may be no markdowns in a given year.b. this has a tendency to provide a far better approximation of the lower of cost or industry.c. markups are also ignored.d. this often tends to lead to the showing of a normal profit margin in a duration once no markdvery own items have actually been offered.
To develop an inventory valuation which approximates the reduced of price or market using the traditional retail inventory strategy, the computation of the proportion of cost to retail shoulda. incorporate markups but not markdowns.b. include markups and also markdowns.c. overlook both markups and markdowns.d. include markdowns but not markups
When calculating the expense proportion for the retail inventory strategy,a. if it is the standard technique, the start inventory is included and also markdowns are deducted.b. if it is the LIFO method, the start inventory is excluded and markdowns are deducted.c. if it is the LIFO technique, the beginning inventory is had and markdowns are not deducted.d. if it is the traditional strategy, the beginning inventory is excluded and also markdowns are not deducted
Which of the following is not compelled once making use of the retail inventory method?a. All inventory items have to be categorized according to the retail markup portion which shows the item"s offering price.b. A record of the total cost and retail value of products purchased.c. A document of the total price and retail worth of the goods accessible for sale.d. Total sales for the period.
a. all inventory items have to be categorized according to the retail markup percentage which shows the item"s offering price
Which of the adhering to is not a reason the retail inventory technique is provided widely?a. As a control measure in determining inventory shortagesb. For insurance informationc. To permit the computation of net revenue without a physical count of inventoryd. To defer revenue taxes liability
What problem is not vital in order to usage the retail technique to carry out inventory results?a. Retailer keeps a record of the full expenses of assets sold for the duration.b. Retailer keeps a record of the full expenses and also retail worth of items purchased.c. Retailer keeps a record of the full prices and retail value of products accessible for sale.d. Retailer keeps a document of sales for the period
What approach yields results that are basically the same as those of the standard retail method?a. FIFO.b. Lower-of-average-cost-or-industry.c. Median cost.d. LIFO.
What is the result of net markups on the cost-retail ratio once making use of the standard retail method?a. Increases the cost-retail proportion.b. No impact on the cost-retail ratio.c. Depends on the amount of the net markdowns.d. Decreases the cost-retail ratio.
What is the result of freight-in on the cost-retail proportion when utilizing the traditional retail method?a. Increases the cost-retail proportion.b. No impact on the cost-retail proportion.c. Depends on the amount of the net markups.d. Decreases the cost-retail proportion.
Which of the adhering to statements is false about an assumption of inventory expense flow?a. The cost flow presumption require not correspond to the actual physical circulation of products.b. The assumption selected may be changed each bookkeeping duration.c. The FIFO presumption uses the earliest obtained prices to expense the items marketed during a duration.d. The LIFO assumption uses the earliest gained prices to expense the items on hand at the finish of an accounting duration.
The average days to market inventory is computed by dividinga. 365 days by the inventory turnover ratio.b. the inventory turnover proportion by 365 days.c. net sales by the inventory turnover ratio.d. 365 days by expense of products sold.
The inventory turnover proportion is computed by separating the expense of items offered bya. beginning inventory.b. ending inventory.c. average inventory.d. variety of days in the year.
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When using dollar-worth LIFO, if the incremental layer was included last year, it have to be multiplied bya. last year"s cost ratio and also this year"s index.b. this year"s expense ratio and this year"s index.c. last year"s expense ratio and last year"s index.d. this year"s cost proportion and also last year"s index.