(D) All of these. It is inregular bereason losses are well-known however not gains, It usually understates assets, and It ca rise future income.

You are watching: The retail inventory method is based on the assumption that the


The primary basis of audit for inventories is cost. A exit from the expense basis of pricing the inventory is compelled wright here tright here is proof that when the items are sold in the simple course of organization their

When valuing raw products inventory at lower-of-cost-or-sector, what is the interpretation of the term "market"?


(D) All of these. It is inregular because losses are known however not gains, it normally underclaims assets, and it can increase future earnings.


(B) Estimated selling price in the simple course of service much less fairly predictable costs of completion and disposal.


(A) Is constantly the middle value of replacement price, net realizable worth, and also net realizable worth much less a normal profit margin.


An item of inventory purchased this duration for $15.00 has been incorrectly written down to its current replacement price of $10.00. It sells in the time of the adhering to duration for $30.00, its normal marketing price, with disposal expenses of $3.00 and also normal profit of $12.00. Which of the following statements is not true?


(D) The industry worth figure for finishing inventory is substituted for expense and the loss is hidden in expense of goods marketed.


Recording inventory at net realizable worth is allowed, also if it is over price, once there are no considerable expenses of disposal connected and


When inventory declines in worth below original (historical) cost, and also this decline is taken into consideration other than short-lived, what is the maximum amount that the inventory deserve to be valued at?


If a unit of inventory has decreased in value below original cost, yet the sector worth exceeds net realizable value, the amount to be offered for objectives of inventory valuation is


(D) All of these. Tright here is a regulated sector via a quoted price, there are no considerable expenses of disposal, and also the inventory consists of valuable steels or agricultural products.


If a product amount of inventory has been ordered with a formal purchase contract at the balance sheet day for future delivery at firm prices,


In 2006, Lucas Manufacturing signed a contract with a supplier to purchase raw products in 2007 for $700,000. Before the December 31, 2006 balance sheet date, the industry price for these products dropped to $510,000. The journal enattempt to record this instance at December 31, 2006 will result in a credit that should be reported


(D) The full amount of purchases and the full amount of sales reprimary fairly unadjusted from the equivalent previous duration.


(D) Namong these. NOT a part of the inventory is damaged, there is a comprehensive increase in inventory throughout the year, and also tbelow is no beginning inventory bereason it is the first year of procedure.


(D) Provides a method for inventory control and facilitates determicountry of the periodic inventory for certain types of providers.


An inventory method which is designed to approximate inventory valuation at the lower of cost or industry is


(A) Final inventory and also the total of goods easily accessible for sale contain the same proportion of high-price and also low-expense proportion items.


(D) None of these. NOT It might not be provided to estimate inventories for interim statements, It may not be offered to estimate inventories for yearly statements, It might not be supplied by auditors.


When the standard retail inventory method is provided, markdowns are generally ignored in the computation of the expense to retail proportion because


To develop an inventory valuation which approximates the lower of cost or industry utilizing the conventional retail inventory technique, the computation of the ratio of expense to retail should


(A) All inventory items should be categorized according to the retail markup portion which shows the item"s marketing price.


When using dollar-worth LIFO, if the increpsychological layer was added last year, it have to be multiplied by


Marr Corporation has actually two commodities in its finishing inventory, each accounted for at the lower of expense or industry. A profit margin of 30% on selling price is considered normal for each product. Specific information through respect to each product follows:

Product #1 Product #2

Historical expense $40.00 $ 70.00

Replacement price 45.00 54.00

Estimated cost to dispose 10.00 26.00

Estimated selling price 80.00 130.00

In pricing its finishing inventory making use of the lower-of-cost-or-market, what unit worths need to Marr usage for commodities #1 and also #2, respectively?


(B) $46.00 and also $65.00.

NRV – PM = $70 – ($80 × .3) = $46, expense = $40.

Product 2: RC = $54, NRV = $130 – $26 = $104

NRV – PM = $104 – ($130 × .3) = $65, price = $70.


Paul Konerko Company type of sells product 2005WSC for $20 per unit. The cost of one unit of 2005WSC is $18, and also the replacement price is $17. The approximated cost to dispose of a unit is $4, and the normal profit is 40%. At what amount per unit must product 2005WSC be reported, applying lower-of-cost-or-market?


(D) $18. NRV = $20 – $4 = $16, RC = $17

NRV – PM = $16 – ($20 × .40) = $8, cost = $18.


Remington Company type of sells product 1976NLC for $40 per unit. The price of one unit of 1976NLC is $36, and also the replacement price is $34. The approximated expense to dispose of a unit is $8, and also the normal profit is 40%. At what amount per unit have to product 1976NLC be reported, using lower-of-cost-or-market?


(D) $36. NRV = $40 – $8 = $32, RC = $34

NRV – PM = $32 – ($40 × .40) = $16, cost = $36.


Joe Crede Corporation sells its product, a rare steel, in a regulated sector with a quoted price applicable to all quantities. The total expense of 5,000 pounds of the metal currently hosted in inventory is $250,000. The complete offering price is $600,000, and also estimated expenses of disposal are $10,000. At what amount should the inventory of 5,000 pounds be reported in the balance sheet?


(C) 590,000. $600,000 – $10,000 = $590,000.


Pettengal Corporation sells its product, a rare steel, in a regulated industry through a quoted price applicable to all amounts. The complete cost of 5,000 pounds of the steel currently held in inventory is $150,000. The complete marketing price is $350,000, and also approximated expenses of disposal are $5,000. At what amount have to the inventory of 5,000 pounds be reported in the balance sheet?


(C) 345,000. $350,000 – $5,000 = $345,000.


Jermaine Dye Corporation got two inventory items at a lump-amount price of $50,000. The acquisition contained 3,000 systems of product LF, and 7,000 systems of product 1B. LF typically sells for $15 per unit, and 1B for $5 per unit. If Dye sells 1,000 systems of LF, what amount of gross profit must it recognize?


(B) 5,625. LF 3,000 × $15 = ($45,000 ÷ $80,000) × $50,000 = $28,125

1B 7,000 × $5 = $35,000; $35,000 + $45,000 = $80,000

(1,000 × $15) – ($28,125 × 1,000/3,000) = $5,625.


Williamchild Corporation obtained 2 inventory items at a lump-amount cost of $40,000. The acquisition had 3,000 units of product CF, and 7,000 devices of product 3B. CF normally sells for $12 per unit, and also 3B for $4 per unit. If Williamchild sells 1,000 systems of CF, what amount of gross profit have to it recognize?


(B) 4,500. CF 3,000 × $12 = ($36,000 ÷ $64,000) × $40,000 = $22,500

3B 7,000 × $4 = $28,000; $28,000 + $36,000 = $64,000

1,000 × $12) – ($22,500 × 1,000/3,000) = $4,500.


At a lump-sum expense of $48,000, Sealy Company type of newly purchased the adhering to items for resale:

Item No. of Items Purchased Resale Price Per Unit

M 4,000 $2.50

N 2,000 8.00

O 6,000 4.00

The appropriate cost per unit of inventory is:


(C) Item # of Items × Price

M 4,000 × $2.50 = 10,000 10 ÷ 50 × $48,000 = $9,600 ÷ 4,000 = $2.40

N 2,000 × $8.00 = 16,000 16 ÷ 50 × $48,000 = $15,360 ÷ 2,000 = $7.68

O 6,000 × $4.00 = 24,000 24 ÷ 50 × $48,000 = $23,040 ÷ 6,000 = $3.84

50,000


Throughout 2006, Reese Co., a manufacturer of cocoa candies, contracted to purchase 100,000 pounds of cacao beans at $4.00 per pound, distribution to be made in the spring of 2007. Since a record harvest is predicted for 2007, the price per pound for chocolate beans had actually fallen to $3.10 by December 31, 2006.

Of the complying with journal entries, the one which would appropriately reflect in 2006 the impact of the commitment of Reese Co. to purchase the 100,000 pounds of chocolate is


(C) Estimated Loss on Purchase Commitments......................... 90,000

Estimated Licapacity on Purchase Commitments.. 90,000



(C) No gain or loss considering that 12/31 price ($5.60) > contract price ($5,00).



(B) a loss of $400.($5.00 – $4.60) × 1,000 = $400.


The complying with information is accessible for October for Jordan Company.

Beginning inventory $ 50,000

Net purchases 150,000

Net sales 300,000

Percentage markup on cost 66.67%

A fire damaged Jordan’s October 31 inventory, leaving undamaged inventory with a expense of $3,000. Using the gross profit method, the estimated ending inventory damaged by fire is


(A) 17,000. ($50,000 + $150,000) – ($300,000 ÷ 5/3) – $3,000 = $17,000.


The complying with indevelopment is easily accessible for October for Horton Company.

Beginning inventory $100,000

Net purchases 300,000

Net sales 600,000

Percentage markup on price 66.67%

A fire damaged Horton’s October 31 inventory, leaving undamaged inventory with a expense of $6,000. Using the gross profit technique, the estimated finishing inventory damaged by fire is


(A) 34,000. ($100,000 + $300,000) – ($600,000 ÷ 5/3) – $6,000 = $34,000.


Sloan Company, a wholesaler, budgeted the adhering to sales for the shown months:

June July August

Sales on account $1,800,000 $1,840,000 $1,900,000

Cash sales 180,000 200,000 260,000

Total sales $1,980,000 $2,040,000 $2,160,000

All merchandise is marked as much as market at its invoice expense plus 20%. Merchandise inventories at the start of each month are at 30% of that month"s projected cost of goods offered.

The expense of items marketed for the month of June is anticipated to be


(D) 1,650,000. (1 + .2)C = 1,980,000; C = $1,650,000.


Sloan Company kind of, a wholesaler, budgeted the complying with sales for the shown months:

June July August

Sales on account $1,800,000 $1,840,000 $1,900,000

Cash sales 180,000 200,000 260,000

Total sales $1,980,000 $2,040,000 $2,160,000

All merchandise is noted as much as market at its invoice price plus 20%. Merchandise inventories at the start of each month are at 30% of that month"s projected cost of goods marketed.

Merchandise purchases for July are anticipated to be


(D) 1,730,000. COGS: July = $2,040,000 ÷ 1.2 = $1,700,000

Aug. = $2,160,000 ÷ 1.2 = $1,800,000

July"s purchase = ($1,700,000 × .7) + ($1,800,000 × .3) = $1,730,000.


Gomez Company had a gross profit of $360,000, total purchases of $420,000, and also an ending inventory of $240,000 in its initially year of operations as a retailer. Gomez’s sales in its initially year must have been

(A) 540,000. $360,000 + ($420,000 – $240,000) = $540,000.


A markup of 40% on expense is indistinguishable to what markup on selling price?

(A) 29%. .40

———— = .29 = 29%.

1 + .40


Miller, Inc. approximates the cost of its physical inventory at March 31 for use in an interim financial statement. The rate of markup on cost is 25%. The adhering to account balances are available:

Inventory, March 1 $220,000

Purchases 172,000

Purchase retransforms 8,000

Sales throughout March 300,000

The estimate of the expense of inventory at March 31 would be


(B) 144,000. COGS = $300,000 ÷ 1.25 = $240,000

($220,000 + $172,000 – $8,000) – $240,000 = $144,000.


On January 1, 2007, the merchandise inventory of Colegislation, Inc. was $800,000. During 2007 Coregulation purchased $1,600,000 of merchandise and taped sales of $2,000,000. The gross profit price on these sales was 25%.

What is the merchandise inventory of Colaw at December 31, 2007?


(C) 900,000. COGS = $2,000,000 × .75 = $1,500,000

$800,000 + $1,600,000 – $1,500,000 = $900,000.


For 2007, expense of products available for sale for Vale Corporation was $900,000. The gross profit rate was 20%. Sales for the year were $800,000. What was the amount of the ending inventory?


(B) 260,000. $900,000 – ($800,000 × .80) = $260,000.


On April 15 of the existing year, a fire damaged the entire uninsured inventory of a retail save. The following data are available:

Sales, January 1 via April 15 $300,000

Inventory, January 1 50,000

Purchases, January 1 with April 15 250,000

Markup on expense 25%

The amount of the inventory loss is estimated to be


(A) 60,000. $300,000

$50,000 + $250,000 – ————— = $60,000.

1.25


The inventory account of Lance Company type of at December 31, 2007, had the complying with items:

Inventory Amount

Merchandise out on consignment at sales price

(consisting of markup of 40% on marketing price) $15,000

Goods purchased, in transit (shipped f.o.b. shipping point) 12,000

Goods hosted on consignment by Lance 13,000

Goods out on approval (sales price $7,600, cost $6,400) 7,600

Based on the over indevelopment, the inventory account at December 31, 2007, need to be diminished by


(A) 20,200. ($15,000 × 40%) + $13,000 + ($7,600 – $6,400) = $20,200.


Flynn Sales Company type of uses the retail inventory method to value its merchandise inventory. The following information is accessible for the existing year:

Cost Retail

Beginning inventory $ 30,000 $ 50,000

Purchases 145,000 200,000

Freight-in 2,500 —

Net markups — 8,500

Net markdowns — 10,000

Employee discounts — 1,000

Sales — 205,000

If the finishing inventory is to be valued at the lower-of-cost-or-sector, what is the expense to retail ratio?


(B) 177,500 / 258,500. Cost: $30,000 + $145,000 + $2,500 = $177,500.

Retail: $50,000 + $200,000 + $8,500 = $258,500.


The adhering to information concerning the retail inventory strategy are taken from the financial records of Stone Company type of.

Cost Retail

Beginning inventory $ 49,000 $ 70,000

Purchases 224,000 320,000

Freight-in 6,000 —

Net markups — 20,000

Net markdowns — 14,000

Sales — 336,000

The finishing inventory at retail need to be


(B) 60,000. $70,000 + $320,000 + $20,000 – $14,000 – $336,000 = $60,000.


The following information concerning the retail inventory technique are taken from the financial records of Stone Company type of.

Cost Retail

Beginning inventory $ 49,000 $ 70,000

Purchases 224,000 320,000

Freight-in 6,000 —

Net markups — 20,000

Net markdowns — 14,000

Sales — 336,000

If the ending inventory is to be valued at about the lower of cost or market, the calculation of the price to retail ratio need to be based on goods obtainable for sale at (1) expense and also (2) retail, respectively of


(A) $279,000 and also $410,000. Cost: $49,000 + $224,000 + $6,000 = $279,000.

Retail: $70,000 + $320,000 + $20,000 = $410,000.


If the foregoing figures are proved and a count of the finishing inventory reveals that merchandise actually on hand amounts to $54,000 at retail, the company has

(B) continual a loss.


Assuming no adjust in the price level if the LIFO inventory technique were provided in conjunction through the data, the finishing inventory at cost would certainly be


(B) 42,000. $49,000

———— × $60,000 = $42,000.

$70,000


Assuming that the LIFO inventory technique were supplied in conjunction with the information and that the inventory at retail had actually boosted during the duration, then the computation of retail in the cost to retail ratio would


(C) incorporate both markups and also markdowns and exclude beginning inventory.


Gooch Corporation had the complying with amounts, all at retail:

Beginning inventory $ 3,600 Purchases $120,000

Purchase returns 6,000 Net markups 18,000

Abnormal shortage 4,000 Net markdowns 2,800

Sales 72,000 Sales returns 1,800

Employee discounts 1,600 Regular shortage 2,600

What is Gooch’s finishing inventory at retail?


(A) 54,400. $3,600 + $114,000 + $18,000 – $4,000 – $70,200 – $1,600 – $2,800 – $2,600

= $54,400.


Dryer Corporation had actually the complying with quantities, all at retail:

Beginning inventory $ 3,600 Purchases $100,000

Acquisition retransforms 6,000 Net markups 18,000

Abnormal shortage 4,000 Net markdowns 2,800

Sales 72,000 Sales returns 1,800

Employee discounts 1,600 Common shortage 2,600

What is Dryer’s ending inventory at retail?


(A) 34,400. $3,600 + $94,000 + $18,000 – $4,000 – $70,200 – $1,600 – $2,800 – $2,600

= $34,400.


Dye Corporation’s computation of expense of products sold is:

Beginning inventory $ 60,000

Add: Cost of goods purchased 405,000

Cost of products easily accessible for sale 465,000

Ending inventory 90,000

Cost of products sold $375,000

The average days to offer inventory for Dye are


(C) 73.0 $375,000 ÷ <($60,000 + $90,000) ÷ 2> = 5; 365 ÷ 5 = 73.0.


Ace Corporation’s computation of price of goods marketed is:

Beginning inventory $ 60,000

Add: Cost of items purchased 405,000

Cost of items accessible for sale 465,000

Ending inventory 80,000

Cost of items marketed $385,000

The average days to offer inventory for Ace are


(C) 66.4 $385,000 ÷ <($60,000 + $80,000) ÷ 2> = 5.5; 365 ÷ 5.5 = 66.4.


The 2007 financial statements of Wert Company kind of reported a beginning inventory of $80,000, an ending inventory of $120,000, and also price of products sold of $600,000 for the year. Wert’s inventory turnover proportion for 2007 is


(B) 6.0 times. $600,000 ÷ <($80,000 + $120,000) ÷ 2> = 6 times


Trent Co. uses the retail inventory technique. The adhering to indevelopment is obtainable for the current year.

Cost Retail

Beginning inventory $ 78,000 $122,000

Purchases 295,000 415,000

Freight-in 5,000 —

Employee discounts — 2,000

Net markups — 15,000

Net Markdowns — 20,000

Sales — 390,000


(D) $378,000 and $552,000. Cost: $78,000 + $295,000 + $5,000 = $378,000.

Retail: $122,000 + $415,000 + $15,000 = $552,000.


Trent Co. uses the retail inventory technique. The adhering to indevelopment is easily accessible for the current year.

Cost Retail

Beginning inventory $ 78,000 $122,000

Purchases 295,000 415,000

Freight-in 5,000 —

Employee discounts — 2,000

Net markups — 15,000

Net Markdowns — 20,000

Sales — 390,000

The finishing inventory at retail need to be


(D) 140,000. $122,000 + $415,000 – $2,000 + $15,000 – $20,000 – $390,000 = $140,000.


Trent Co. provides the retail inventory strategy. The complying with indevelopment is obtainable for the current year.

Cost Retail

Beginning inventory $ 78,000 $122,000

Purchases 295,000 415,000

Freight-in 5,000 —

Employee discounts — 2,000

Net markups — 15,000

Net Markdowns — 20,000

Sales

The approximate price of the finishing inventory by the conventional retail technique is


(A) 95,900. $140,000 × .685 = $95,900.


If the finishing inventory is to be valued at approximately LIFO cost, the calculation of the cost ratio need to be based upon price and also retail of


(C) $300,000 and $410,000. Cost: $295,000 + $5,000 = $300,000.

Retail: $415,000 + $15,000 – $20,000 = $410,000.


Assuming that the LIFO inventory approach is used, that the start inventory is the base inventory once the index was 100, and that the index at year end is 112, the finishing inventory at dollar-value LIFO retail cost is


(A) 80,460. $140,000 Base year price = EI = ————— = $125,000

1.12

$122,000
price = $78,000

$3,000 × .732* × 1.12 = 2,460

$80,460

$300,000

* ————— = .732

$410,000


Baker Company kind of, which uses the retail LIFO approach to recognize inventory cost, has offered the adhering to information for 2007:

Cost Retail

Net purchases 378,000 562,000

Net markups 68,000

Net markdowns 30,000

Net sales 530,000

Assuming steady prices (no change in the price index in the time of 2007), what is the expense of Baker"s inventory at December 31, 2007?


(B) 138,100. Cost to retail ratio = $378,000 ÷ ($562,000 + $68,000 – $30,000) = 0.63

EI = $140,000 + $562,000 + $68,000 – $30,000 – $530,000

= $210,000 at retail

$210,000 – $140,000 = $70,000

Cost of inventory = $94,000 + ($70,000 × .63) = $138,100.


Baker Company kind of, which provides the retail LIFO technique to recognize inventory price, has gave the adhering to information for 2007:

Cost Retail

Net purchases 378,000 562,000

Net markups 68,000

Net markdowns 30,000

Net sales 530,000

Assuming that the price index was 105 at December 31, 2007 and 100 at January 1, 2007, what is the cost of Baker"s inventory at December 31, 2007 under the dollar-value-LIFO retail method?


(A) 133,690. Base year price: EI = $210,000 ÷ 1.05 = $200,000

$140,000
cost = $ 94,000

60,000 × .63 × 1.05 = 39,690

$200,000 $133,690


Teel Distribution Co. has actually determined its December 31, 2007 inventory on a FIFO basis at $250,000. Indevelopment pertaining to that inventory follows:

Estimated selling price $255,000

Estimated price of disposal 10,000

Typical profit margin 30,000

Current replacement price 225,000

Teel records losses that outcome from using the lower-of-cost-or-industry dominance. At December 31, 2007, the loss that Teel must recognize is


(D) 25,000. $250,000 – $225,000 (RC) = $25,000.


Under the lower-of-cost-or-sector approach, the replacement expense of an inventory item would be offered as the designated market value


(B) net realizable value much less the normal profit margin.


Gore Company"s accountancy documents indicated the complying with information:

Purchases throughout 2007 3,000,000

Sales in the time of 2007 3,800,000

A physical inventory tackled December 31, 2007, brought about an ending inventory of $700,000. Gore"s gross profit on sales has actually remained continuous at 25% in recent years. Gore suspects some inventory might have been taken by a new employee. At December 31, 2007, what is the approximated expense of lacking inventory?

(A) 50,000. $3,800,000 × .75 = $2,850,000 (COGS)

$600,000 + $3,000,000 – $2,850,000 – $700,000 = $50,000.


Eaton Co. supplies the retail inventory method to estimate its inventory for interim statement objectives. File relating to the computation of the inventory at July 31, 2007, are as follows:

Cost Retail

Purchases 1,000,000 1,575,000

Markups, net 175,000

Sales 1,750,000

Estimated normal shoplifting losses 20,000

Markdowns, net 110,000

Under the lower-of-cost-or-market approach, Eaton"s estimated inventory at July 31, 2007 is


(A) 72,000. ($200,000 + $1,000,000) ÷ ($250,000 + $1,575,000 + $175,000) = 0.6

($250,000 + $1,575,000 + $175,000 – $20,000 – $110,000 –

$1,750,000) × 0.6 = $72,000.


At December 31, 2007, the complying with indevelopment was obtainable from Dole Co."s accountancy records:

Cost Retail

Purchases 833,000 1,155,000

Additional markups 42,000

Available for sale $980,000 $1,400,000

Sales for the year totaled $1,050,000. Markdowns ainstalled to $10,000. Under the lower-of-cost-or-market method, Dole"s inventory at December 31, 2007 was


(D) 238,000. $980,000 ÷ $1,400,000 = 0.7

($1,400,000 – $10,000 – $1,050,000) × 0.7 = $238,000.

See more: Which Of The Following Is The Best Description Of A Control For An Experiment


On December 31, 2006, Lilly Co. embraced the dollar-worth LIFO retail inventory strategy. Inventory data for 2007 are as follows:

LIFO Cost Retail

Increase in price level for 2007 10%

Cost to retail proportion for 2007 70%

Under the LIFO retail strategy, Lilly"s inventory at December 31, 2007, have to be


(A) $361,600. $550,000 ÷ 1.1 = $500,000

$300,000 + ($80,000 × 1.1 × .7) = $361,600.


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