Product
#1 Product #2
Historical cost $40.00 $
70.00
Replacement cost 45.00 54.00
Estimated cost to dispose 10.00 26.00
Estimated selling price 80.00 130.00
In pricing its ending inventory using
the lower-of-cost-or-market, what unit values should Oslo
a. $40.00
and $65.00.
b. $46.00
and $65.00.
c. $46.00
and $60.00.
d. $45.00
and $54.00.
69. Muckenthaler Company sells product 2005WSC
for $20 per unit. The cost of one unit of 2005WSC is $18, and the replacement
cost is $17. The estimated cost to dispose of a unit is $4, and the normal
profit is 40%. At what amount per unit should product 2005WSC be reported,
applying lower-of-cost-or-market?
a. $8.
b. $16.
c. $17.
d. $18.
70. Lexington Company sells product 1976NLC for
$40 per unit. The cost of one unit of 1976NLC is $36, and the replacement cost
is $34. The estimated cost to dispose of a unit is $8, and the normal profit is
40%. At what amount per unit should product 1976NLC be reported, applying
lower-of-cost-or-market?
a. $16.
b. $32.
c. $34.
d. $36.
71. Given the acquisition cost of product Z is
$32.00, the net realizable value for product Z is $29.00, the normal profit for
product Z is $2.50, and the market value (replacement cost) for product Z is
$30.00, what is the proper per unit inventory price for product Z?
a. $32.00.
b. $30.00.
c. $26.50.
d. $29.00.
72. Given the acquisition cost of product ALPHA
is $8.50, the net realizable value for product ALPHA is $8.35, the normal
profit for product ALPHA is $0.62, and the market value (replacement cost) for
product ALPHA is $7.36, what is the proper per unit inventory price for product
ALPHA?
a. $8.50.
b. $7.73
c. $7.36.
d. $8.35.
73. Given the acquisition cost of product
Dominoe is $86.62, the net realizable value for product Dominoe is $76.98, the
normal profit for product Dominoe is $8.63, and the market value (replacement
cost) for product Dominoe is $81.36, what is the proper
per unit inventory price for product Dominoe?
per unit inventory price for product Dominoe?
a. $81.36.
b. $68.35.
c. $76.98.
d. $86.62.
74. Given the historical cost of product Z is
$160, the selling price of product Z is $190, costs to sell product Z are $21,
the replacement cost for product Z is $166, and the normal profit margin is 40%
of sales price, what is the market value that should be used in the
lower-of-cost-or-market comparison?
a. $160.
b. $169.
c. $166.
d. $ 93.
75. Given the historical cost of product Z is
$160, the selling price of product Z is $19, costs to sell product Z are $21,
the replacement cost for product Z is $166, and the normal profit margin is 40%
of sales price, what is the amount that should be used to value the inventory
under the lower-of-cost-or-market method?
a. $ 93.
b. $160.
c. $169.
d. $166.
76. Given the historical cost of product
Dominoe is $65, the selling price of product Dominoe is $90, costs to sell
product Dominoe are $16, the replacement cost for product Dominoe is $60, and
the normal profit margin is 20% of sales price, what is the cost amount that
should be used in the lower-of-cost-or-market comparison?
a. $74.
b. $60.
c. $56.
d. $65.
77. Given the historical cost of product
Dominoe is $65, the selling price of product Dominoe is $90, costs to sell
product Dominoe are $16, the replacement cost for product Dominoe is $60, and
the normal profit margin is 20% of sales price, what is the amount that should
be used to value the inventory under the lower-of-cost-or-market method?
a. $65.
b. $56.
c. $60.
d. $74.
78. Robust Inc. has the following information
related to an item in its ending inventory. Product 66 has a cost of $6,500, a
replacement cost of $6,100, a net realizable value of $6,200, and a normal
profit margin of $400. What is the final lower-of-cost-or-market inventory
value for product 66?
a. $5,800.
b. $6,100.
c. $6,500.
d. $6,200.
79. Robust Inc. has the following information
related to an item in its ending inventory. Packit (Product # 874) has a cost
of $698, a replacement cost of $536, a net realizable value of $624, and a
normal profit margin of $28. What is the final lower-of-cost-or-market
inventory value for Packit?
a. $596.
b. $698.
c. $536.
d. $624.
80. Robust Inc. has the
following information related to an item in its ending inventory. Acer Top has
a cost of $502, a replacement cost of $468, a net realizable value of $531, and
a normal profit margin of $68. What is the final lower-of-cost-or-market
inventory value for Acer Top?
a. $463.
b. $502.
c. $468.
d. $531.
81. Mortenson Corporation sells its product, a
rare metal, in a controlled market with a quoted price applicable to all
quantities. The total cost of 5,000 pounds of the metal now held in inventory
is $250,000. The total selling price is $600,000, and estimated costs of
disposal are $10,000. At what amount should the inventory of 5,000 pounds be
reported in the balance sheet?
a. $240,000.
b. $250,000.
c. $590,000.
d. $600,000.
82. Rodriguez Corporation sells its product, a
rare metal, in a controlled market with a quoted price applicable to all
quantities. The total cost of 5,000 pounds of the metal now held in inventory
is $150,000. The total selling price is $350,000, and estimated costs of
disposal are $5,000. At what amount should the inventory of 5,000 pounds be
reported in the balance sheet?
a. $145,000.
b. $150,000.
c. $345,000.
d. $350,000.
83. Turner Corporation acquired two inventory
items at a lump-sum cost of $50,000. The acquisition included 3,000 units of
product LF, and 7,000 units of product 1B. LF normally sells for $15 per unit,
and 1B for $5 per unit. If Turner sells 1,000 units of LF, what amount of gross
profit should it recognize?
a. $1,875
b. $5,625.
c. $10,000.
d. $11,875.
84. Robertson Corporation acquired two
inventory items at a lump-sum cost of $40,000. The acquisition included 3,000
units of product CF, and 7,000 units of product 3B. CF normally sells for $12
per unit, and 3B for $4 per unit. If Robertson sells 1,000 units of CF, what
amount of gross profit should it recognize?
a. $1,500.
b. $4,500.
c. $8,000.
d. $9,500.
85. At a lump-sum cost of $48,000, Pratt Company recently purchased
the following 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:
M N O
a. $2.50 $8.00 $4.00
b. $2.07 $13.24 $2.21
c. $2.40 $7.68 $3.84
d. $4.00 $4.00 $4.00
86. Confectioners, a chain of candy stores, purchases its candy in
bulk from its suppliers. For a recent shipment, the company paid $3,000 and
received 8,500 pieces of candy that are allocated among three groups. Group 1
consists of 2,500 pieces that are expected to sell for $0.25 each. Group 2
consists of 5,500 pieces that are expected to sell for 0.60 each. Group 3
consists of 500 pieces that are expected to sell for $1.20 each. Using the
relative sales value method, what is the cost per item in group 1?
a. $0.250.
b. $0.166.
c. $0.200.
d. $.0375.
87. Confectioners, a chain of candy stores, purchases its candy in
bulk from its suppliers. For a recent shipment, the company paid $3,000 and
received 8,500 pieces of candy that are allocated among three groups. Group 1
consists of 2,500 pieces that are expected to sell for $0.25 each. Group 2
consists of 5,500 pieces that are expected to sell for 0.60 each. Group 3
consists of 500 pieces that are expected to sell for $1.20 each. Using the
relative sales value method, what is the cost per item in group 2?
a. $0.375.
b. $0.600.
c. $0.350.
d. $.0398.
88. Confectioners, a chain of candy stores, purchases its candy in
bulk from its suppliers. For a recent shipment, the company paid $3,000 and
received 8,500 pieces of candy that are allocated among three groups. Group 1
consists of 2,500 pieces that are expected to sell for $0.25 each. Group 2
consists of 5,500 pieces that are expected to sell for 0.60 each. Group 3
consists of 500 pieces that are expected to sell for $1.20 each. Using the
relative sales value method, what is the cost per item in group 3?
a. $0.796.
b. $0.375.
c. $1.200.
d. $0.900.
89. During
the current fiscal year, Jeremiah Corp. signed a long-term noncancellable
purchase commitment with its primary supplier. Jeremiah agreed to purchase $2.5
million of raw materials during the next fiscal year under this contract. At
the end of the current fiscal year, the raw material to be purchased under this
contract had a market value of $2.3 million. What is the journal entry at the
end of the current fiscal year?
a. Debit Unrealized
Loss for $200,000 and credit Estimated Liability on Purchase Commitment for
$200,000.
b. Debit Estimated
liability on Purchase Commitment for $200,000 and credit Unrealized Gain for
$200,000.
c. Debit Unrealized
Loss for $2,300,000 and credit Estimated Liability on Purchase Commitment for
$2,300,000.
d. No
journal entry is required.
90. During the prior fiscal year, Jeremiah Corp. signed a long-term
noncancellable purchase commitment with its primary supplier to purchase $2.5
million of raw materials. Jeremiah paid the $2.5 million to acquire the raw
materials when the raw materials were only worth $2.2 million. Assume that the
purchase commitment was properly recorded. What is the journal entry to record
the purchase?
a. Debit Inventory
for $2,200,000, and credit Cash for $2,200,000.
b. Debit Inventory
for $2,200,000, debit Unrealized Loss for $300,000, and credit Cash for
$2,500,000.
c. Debit Inventory
for $2,200,000, debit Estimated Liability on Purchase Commitment for $300,000
and credit Cash for $2,500,000.
d. Debit Inventory
for $2,500,000, and credit Cash for $2,500,000.
91. During 2010, Larue Co., a manufacturer of chocolate candies,
contracted to purchase 100,000 pounds of cocoa beans at $4.00 per pound,
delivery to be made in the spring of 2011. Because a record harvest is
predicted for 2011, the price per pound for cocoa beans had fallen to $3.10 by
December 31, 2010.
Of the following journal entries, the one which would properly
reflect in 2010 the effect of the commitment of Larue Co. to purchase the
100,000 pounds of cocoa is
a. Cocoa
Accounts
Payable................................................ 400,000
b. Cocoa
Loss
on Purchase Commitments.................................... 90,000
Accounts
Payable................................................ 400,000
c. Estimated Loss on Purchase Commitments................... 90,000
Estimated
Liability on Purchase Commitments.. 90,000
d. No entry would be necessary in 2010
92. RS Corporation, a manufacturer of ethnic
foods, contracted in 2010 to purchase 500 pounds of a spice mixture at $5.00
per pound, delivery to be made in spring of 2011. By 12/31/10, the price per
pound of the spice mixture had risen to $5.60 per pound. In 2010, AJ should
recognize
a. a
loss of $2,500.
b. a
loss of $300.
c. no
gain or loss.
d. a
gain of $300.
93. LF Corporation, a
manufacturer of Mexican foods, contracted in 2010 to purchase 1,000 pounds of a
spice mixture at $5.00 per pound, delivery to be made in spring of 2011. By
12/31/10, the price per pound of the spice mixture had dropped to $4.60 per
pound. In 2010, LF should recognize
a a
loss of $5,000.
b. a
loss of $400.
c. no
gain or loss.
d. a
gain of $400.
94. The following information is available for
October for Barton Company.
Beginning inventory $ 50,000
Net purchases 150,000
Net sales 300,000
Percentage markup on cost
66.67%
A
fire destroyed Barton’s October 31 inventory, leaving undamaged inventory with
a cost of $3,000. Using the gross profit method, the estimated ending inventory
destroyed by fire is
a. $17,000.
b. $77,000.
c. $80,000.
d. $100,000.
95. The following information is available for
October for Norton Company.
Beginning inventory $100,000
Net purchases 300,000
Net sales 600,000
Percentage markup on cost 66.67%
A
fire destroyed Norton’s October 31 inventory, leaving undamaged inventory with
a cost of $6,000. Using the gross profit method, the estimated ending inventory
destroyed by fire is
a. $34,000.
b. $154,000.
c. $160,000.
d. $200,000.
Use the following information for questions 96 and 97.
Miles Company, a wholesaler, budgeted the following sales for the
indicated 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 up to sell at its invoice cost plus 20%.
Merchandise inventories at the beginning of each month are at 30% of that
month's projected cost of goods sold.
96. The
cost of goods sold for the month of June is anticipated to be
a. $1,440,000.
b. $1,500,000.
c. $1,520,000.
d. $1,650,000.
97. Merchandise purchases for July are anticipated to be
a. $1,632,000.
b. $2,076,000.
c. $1,700,000.
d. $1,730,000.
98. Reyes Company had a gross profit of $360,000, total purchases of
$420,000, and an ending inventory of $240,000 in its first year of operations as a retailer. Reyes’s sales in its first
year must have been
a. $540,000.
b. $660,000.
c. $180,000.
d. $600,000.
99. A markup of 40% on cost is equivalent to what markup on selling
price?
a. 29%
b. 40%
c. 60%
d. 71%
100. Kesler, Inc. estimates
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 following account balances
are available:
Inventory, March 1 $220,000
Purchases 172,000
Purchase returns 8,000
Sales during March 300,000
The estimate of the cost of inventory at March 31
would be
a. $84,000.
b. $144,000.
c. $159,000.
d. $112,000.
101. On January 1, 2010, the merchandise inventory of Glaus, Inc. was
$800,000. During 2010 Glaus purchased $1,600,000 of merchandise and recorded
sales of $2,000,000. The gross profit rate on these sales was 25%. What is the
merchandise inventory of Glaus at December 31, 2010?
a. $400,000.
b. $500,000.
c. $900,000.
d. $1,500,000.
102. For
2010, cost of goods available for sale for Tate 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?
a. $0.
b. $260,000.
c. $180,000.
d. $160,000.
103. On April 15 of the current year, a fire destroyed the entire
uninsured inventory of a retail store. The following data are available:
Sales, January 1 through April 15 $300,000
Inventory, January 1 50,000
Purchases, January 1 through April 15 250,000
Markup on cost 25%
The amount of the
inventory loss is estimated to be
a. $60,000.
b. $30,000.
c. $75,000.
d. $50,000.
104. The inventory account of Irick Company at December 31, 2010,
included the following items:
Inventory
Amount
Merchandise out on consignment at
sales price
(including
markup of 40% on selling price) $15,000
Goods purchased, in transit (shipped
f.o.b. shipping point) 12,000
Goods held on consignment by Irick 13,000
Goods out on approval (sales price
$7,600, cost $6,400) 7,600
Based
on the above information, the inventory account at December 31, 2010, should be
reduced by
a. $20,200.
b. $22,600.
c. $32,200.
d. $32,000.
105. The sales price for a product provides a gross profit of 25% of
sales price. What is the gross profit as a percentage of cost?
a. 25%.
b. 20%.
c. 33%.
d. Not enough information is
provided to determine.
106. Gamma Ray Corp. has annual sales totaling $650,000 and an
average gross profit of 20% of cost. What is the dollar amount of the gross
profit?
a. $130,000.
b. $97,500.
c. $108,333.
d. $162,500.
107. On August 31, a hurricane destroyed a retail location of Vinny's
Clothier including the entire inventory on hand at the location. The inventory
on hand as of June 30 totaled $320,000. Since June 30 until the time of the hurricane,
the company made purchases of $85,000 and had sales of $250,000. Assuming the
rate of gross profit to selling price is 40%, what is the approximate value of
the inventory that was destroyed?
a. $320,000.
b. $181,500.
c. $205,000.
d. $255,000.
108. On October 31, a fire destroyed PH Inc.'s entire retail
inventory. The inventory on hand as of January 1 totaled $680,000. From January
1 through the time of the fire, the company made purchases of $165,000 and had
sales of $360,000. Assuming the rate of gross profit to selling price is 40%,
what is the approximate value of the inventory that was destroyed?
a. $680,000.
b. $673,000.
c. $485,000.
d. $629,000.
109. On March 15, a fire
destroyed Interlock Company's entire retail inventory. The inventory on hand as
of January 1 totaled $1,650,000. From January 1 through the time of the fire,
the company made purchases of $683,000, incurred freight-in of $78,000, and had
sales of $1,210,000. Assuming the rate of gross profit to selling price is 30%,
what is the approximate value of the inventory that was destroyed?
a. $2,048,000.
b. $1,486,000.
c. $1,564,000.
d. $2,411,000.
110. Dicer uses the conventional retail method to determine its ending
inventory at cost. Assume the beginning inventory at cost (retail) were
$130,000 ($198,000), purchases during the current year at cost (retail) were
$685,000 ($1,100,000), freight-in on these purchases totaled $43,000, sales
during the current year totaled $1,050,000, and net markups (markdowns) were
$24,000 ($36,000). What is the ending inventory value at cost?
a. $153,164.
b. $156,165.
c. $157,412.
d. $236,000.
111. Boxer Inc. uses the conventional retail method to determine its
ending inventory at cost. Assume the beginning inventory at cost (retail) were
$65,500 ($99,000), purchases during the current year at cost (retail) were
$568,000 ($865,600), freight-in on these purchases totaled $26,500, sales
during the current year totaled $811,000, and net markups were $69,000. What is
the ending inventory value at cost?
a. $222,600.
b. $174,366.
c. $142,241.
d. $152,308.
112. Barker Pet supply uses the conventional retail method to
determine its ending inventory at cost. Assume the beginning inventory at cost
(retail) were $265,600 ($326,900), purchases during the current year at cost
(retail) were $1,068,600 ($1,386,100), freight-in on these purchases totaled
$63,900, sales during the current year totaled $1,302,000, and net markups
(markdowns) were $2,000 ($96,300). What is the ending inventory value at cost?
a. $316,700.
b. $258,111.
c. $411,000.
d. $246,667.
113. Crane Sales Company uses the retail inventory method to value
its merchandise inventory. The following information is available for the current
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 ending inventory is to be
valued at the lower-of-cost-or-market, what is the cost to retail ratio?
a. $177,500
÷ $250,000
b. $177,500
÷ $258,500
c. $175,000
÷ $260,000
d. $177,500
÷ $248,500
Use the following information for questions 114 through 118.
The following data concerning the retail inventory method are taken
from the financial records of Welch Company.
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
114. The ending inventory at retail should be
a. $74,000.
b. $60,000.
c. $64,000.
d. $42,000.
115. If the ending inventory is
to be valued at approximately the lower of cost or market, the calculation of
the cost to retail ratio should be based on goods available for sale at (1)
cost and (2) retail, respectively of
a. $279,000
and $410,000.
b. $279,000
and $396,000.
c. $279,000
and $390,000.
d. $273,000
and $390,000.
116. If the foregoing figures are verified and a count of the ending
inventory reveals that merchandise actually on hand amounts to $54,000 at
retail, the business has
a. realized
a windfall gain.
b. sustained
a loss.
c. no
gain or loss as there is close coincidence of the inventories.
d. none
of these.
*117. Assuming no change in the price level if the LIFO inventory
method were used in conjunction with the data, the ending inventory at cost
would be
a. $42,600.
b. $42,000.
c. $40,800.
d. $43,200.
*118. Assuming that the LIFO inventory method were used in conjunction
with the data and that the inventory at retail had increased during the period,
then the computation of retail in the cost to retail ratio would
a. exclude
both markups and markdowns and include beginning inventory.
b. include
markups and exclude both markdowns and beginning inventory.
c. include
both markups and markdowns and exclude beginning inventory.
d. exclude
markups and include both markdowns and beginning inventory.
119. Drake Corporation had the following
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 Normal
shortage 2,600
What
is Drake’s ending inventory at retail?
a. $54,400.
b. $56,000.
c. $57,600.
d. $58,400
120. Goren
Corporation had the following amounts, all at retail:
Beginning inventory $ 3,600 Purchases $100,000
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 Normal
shortage 2,600
What is Goren’s ending
inventory at retail?
a. $34,400.
b. $36,000.
c. $37,600.
d. $38,400
121. Fry Corporation’s computation of cost of
goods sold is:
Beginning inventory $ 60,000
Add: Cost of goods purchased 405,000
Cost of goods available for sale
465,000
Ending inventory 90,000
Cost of goods sold $375,000
The average days to sell inventory for Fry are
a. 58.4
days.
b. 67.6
days.
c. 73.0
days.
d. 87.6
days.
122. East Corporation’s computation of cost of
goods sold is:
Beginning inventory $ 60,000
Add: Cost of goods purchased 405,000
Cost of goods available for sale 465,000
Ending inventory 80,000
Cost of goods sold $385,000
The average days to sell inventory for East are
a. 56.9
days.
b. 63.1
days.
c. 66.4
days.
d. 75.8
days.
123. The 2010 financial statements of Sito Company reported a
beginning inventory of $80,000, an ending inventory of $120,000, and cost of
goods sold of $600,000 for the year. Sito’s inventory turnover ratio for 2010
is
a. 7.5
times.
b. 6.0
times.
c. 5.0
times.
d. 4.3
times.
124. Boxer Inc. reported
inventory at the beginning of the current year of $360,000 and at the end of
the current year of $411,000. If net sales for the current year are $2,214,600
and the corresponding cost of sales totaled $1,879,400, what is the inventory
turnover ratio for the current year?
a. 5.74.
b. 4.57.
c. 5.39.
d. 4.88.
Use the following information for questions 125 through 129.
Plank Co. uses the retail inventory
method. The following information is available 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
125. If the ending inventory is to be valued at approximately lower
of average cost or market, the calculation of the cost ratio should be based on
cost and retail of
a. $300,000
and $430,000.
b. $300,000
and $428,000.
c. $373,000
and $550,000.
d. $378,000
and $552,000.
126. The ending inventory at retail should be
a. $160,000.
b. $150,000.
c. $144,000.
d. $140,000.
127. The approximate cost of the ending inventory by the conventional
retail method is
a. $95,900.
b. $94,920.
c. $98,000.
d. $102,480.
*128. If the ending inventory is to be valued at approximately LIFO
cost, the calculation of the cost ratio should be based on cost and retail of
a. $378,000
and $552,000.
b. $378,000
and $532,000.
c. $300,000
and $410,000.
d. $300,000
and $430,000.
*129. Assuming that the LIFO
inventory method is used, that the beginning inventory is the base inventory
when the index was 100, and that the index at year end is 112, the ending
inventory at dollar-value LIFO retail cost is
a. $80,460.
b. $92,757.
c. $95,900.
d. $102,480.
Use the following information for questions 130 and 131.
Eaton Company, which uses the retail
LIFO method to determine inventory cost, has provided the following information
for 2010:
Cost Retail
Inventory, 1/1/10 $ 94,000 $140,000
Net purchases 378,000 562,000
Net markups 68,000
Net markdowns 30,000
Net sales 530,000
*130. Assuming stable prices (no change in the price index during
2010), what is the cost of Eaton's inventory at December 31, 2010?
a. $128,100.
b. $138,100.
c. $136,000.
d. $132,300.
*131. Assuming that the price index
was 105 at December 31, 2010 and 100 at January 1, 2010, what is the
cost of Eaton's inventory at December 31, 2010 under the dollar-value-LIFO
retail method?
a. $133,690.
b. $138,915.
c. $140,305.
d. $131,800.
132. Ryan Distribution Co. has
determined its December 31, 2010 inventory on a FIFO basis at $250,000.
Information pertaining to that inventory follows:
Estimated selling price $255,000
Estimated cost of disposal 10,000
Normal profit margin 30,000
Current replacement cost 225,000
Ryan records losses that result from applying the
lower-of-cost-or-market rule. At December 31, 2010, the
loss that Ryan should recognize is
a. $0.
b. $5,000.
c. $20,000.
d. $25,000.
133. Under the lower-of-cost-or-market method, the replacement cost
of an inventory item would be used as the designated market value
a. when
it is below the net realizable value less the normal profit margin.
b. when
it is below the net realizable value and above the net realizable value less
the normal profit margin.
c. when
it is above the net realizable value.
d. regardless
of net realizable value.
134. The original cost of an inventory item is above the replacement
cost and the net realizable value. The replacement cost is below the net
realizable value less the normal profit margin. As a result, under the
lower-of-cost-or-market method, the inventory item should be reported at the
a. net
realizable value.
b. net
realizable value less the normal profit margin.
c. replacement
cost.
d. original
cost.
135. Keen Company's accounting records indicated the following
information:
Inventory, 1/1/10 $ 600,000
Purchases during 2010 3,000,000
Sales during 2010 3,800,000
A physical inventory taken on December 31, 2010, resulted in an
ending inventory of $700,000. Keen's gross profit on sales has remained
constant at 25% in recent years. Keen suspects some inventory may have been
taken by a new employee. At December 31, 2010, what is the estimated cost of
missing inventory?
a. $50,000.
b. $150,000.
c. $200,000.
d. $250,000.
136. Henke
Co. uses the retail inventory method to estimate its inventory for interim
statement purposes. Data relating to the computation of the inventory at July
31, 2010, are as follows:
Cost Retail
Inventory, 2/1/10 $ 200,000 $ 250,000
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 method, Henke's
estimated inventory at July 31, 2010 is
a. $72,000.
b. $84,000.
c. $96,000.
d. $120,000.
137. At December 31, 2010, the following information was available
from Kohl Co.'s accounting records:
Cost Retail
Inventory, 1/1/10 $147,000 $
203,000
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
amounted to $10,000. Under the lower-of-cost-or-market method, Kohl's inventory
at December 31, 2010 was
a. $294,000.
b. $245,000.
c. $252,000.
d. $238,000.
*138. On December 31, 2010, Pacer Co. adopted the dollar-value LIFO
retail inventory method. Inventory data for 2011 are as follows:
LIFO
Cost Retail
Inventory, 12/31/10 $300,000 $420,000
Inventory, 12/31/11 ? 550,000
Increase in price level for 2011 10%
Cost to retail ratio for 2011 70%
Under the LIFO retail method, Pacer's inventory
at December 31, 2011, should be
a. $361,600.
b. $385,000.
c. $391,000.
d $400,100.
132. Ryan Distribution Co. has
determined its December 31, 2010 inventory on a FIFO basis at $250,000.
Information pertaining to that inventory follows:
Estimated selling price $255,000
Estimated cost of disposal 10,000
Normal profit margin 30,000
Current replacement cost 225,000
Ryan records losses that result from applying the
lower-of-cost-or-market rule. At December 31, 2010, the
loss that Ryan should recognize is
a. $0.
b. $5,000.
c. $20,000.
d. $25,000.
133. Under the lower-of-cost-or-market method, the replacement cost
of an inventory item would be used as the designated market value
a. when
it is below the net realizable value less the normal profit margin.
b. when
it is below the net realizable value and above the net realizable value less
the normal profit margin.
c. when
it is above the net realizable value.
d. regardless
of net realizable value.
134. The original cost of an inventory item is above the replacement
cost and the net realizable value. The replacement cost is below the net
realizable value less the normal profit margin. As a result, under the
lower-of-cost-or-market method, the inventory item should be reported at the
a. net
realizable value.
b. net
realizable value less the normal profit margin.
c. replacement
cost.
d. original
cost.
135. Keen Company's accounting records indicated the following
information:
Inventory, 1/1/10 $ 600,000
Purchases during 2010 3,000,000
Sales during 2010 3,800,000
A physical inventory taken on December 31, 2010, resulted in an
ending inventory of $700,000. Keen's gross profit on sales has remained
constant at 25% in recent years. Keen suspects some inventory may have been
taken by a new employee. At December 31, 2010, what is the estimated cost of
missing inventory?
a. $50,000.
b. $150,000.
c. $200,000.
d. $250,000.
136. Henke
Co. uses the retail inventory method to estimate its inventory for interim
statement purposes. Data relating to the computation of the inventory at July
31, 2010, are as follows:
Cost Retail
Inventory, 2/1/10 $ 200,000 $ 250,000
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 method, Henke's
estimated inventory at July 31, 2010 is
a. $72,000.
b. $84,000.
c. $96,000.
d. $120,000.
137. At December 31, 2010, the following information was available
from Kohl Co.'s accounting records:
Cost Retail
Inventory, 1/1/10 $147,000 $
203,000
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
amounted to $10,000. Under the lower-of-cost-or-market method, Kohl's inventory
at December 31, 2010 was
a. $294,000.
b. $245,000.
c. $252,000.
d. $238,000.
*138. On December 31, 2010, Pacer Co. adopted the dollar-value LIFO
retail inventory method. Inventory data for 2011 are as follows:
LIFO
Cost Retail
Inventory, 12/31/10 $300,000 $420,000
Inventory, 12/31/11 ? 550,000
Increase in price level for 2011 10%
Cost to retail ratio for 2011 70%
Under the LIFO retail method, Pacer's inventory
at December 31, 2011, should be
a. $361,600.
b. $385,000.
c. $391,000.
d $400,100.
ANSWERS:
No. Answer Solution
68. a Product 1: RC = $45, NRV = $80 – $10 = $70
NRV
– PM = $70 – ($80 × .3) = $46, cost = $40.
Product
2: RC = $54, NRV = $130 – $26 = $104
NRV
– PM = $104 – ($130 × .3) = $65, cost = $70.
69. b NRV
= $20 – $4 = $16, RC = $17
NRV
– PM = $16 – ($20 × .40) = $8, cost = $18.
70. b NRV
= $40 – $8 = $32, RC = $34
NRV
– PM = $32 – ($40 × .40) = $16, cost = $36.
71. d $29.00
MV, $32.00 Cost, LCM = $29.00.
72. b $7.73
($8.35 – $0.62) MV, $8.50 Cost, LCM = $7.73.
73. c $76.98
MV, $86.62 Cost, LCM = $76.98.
74. c Ceiling
$169 ($190 – $21); Floor $93 ($169 – $76), RC $166; $166 MV.
75. b Ceiling
$169 ($190 – $21), Floor $93 ($169 – $76), RC $166; $166 MV,
$160 Cost, LCM = $160.
$160 Cost, LCM = $160.
76. d $65
Cost.
77. c Ceiling $74
($90 – $16), Floor $56 ($74 – $18), RC $60; $60 MV,
$65 Cost, LCM = $60.
$65 Cost, LCM = $60.
78. b $6,100
MV, $6,500 Cost, LCM = $6,100.
79. a $596
($624 – $28) MV, $698 Cost, LCM = $596.
80. c $468
MV, $502 Cost, LCM = $468.
81. c $600,000
– $10,000 = $590,000.
82. c $350,000
– $5,000 = $345,000.
83. b 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.
84. b 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.
85. 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
86. b (2,500
× $0.25) + (5,500 × $0.60) + (500 × $1.20) = $4,525;
[(2,500 × $0.25) ÷ $4,525] × $3,000 = $414 ÷ 2,500 = $0.166.
[(2,500 × $0.25) ÷ $4,525] × $3,000 = $414 ÷ 2,500 = $0.166.
87. d (2,500
× $0.25) + (5,500 × $0.60) + (500 × $1.20) = $4,525;
[(5,500 × $0.60) ÷ $4,525] × $3,000 = $2,188 ÷ 5,500 = $0.398.
[(5,500 × $0.60) ÷ $4,525] × $3,000 = $2,188 ÷ 5,500 = $0.398.
88. a (2,500
× $0.25) + (5,500 × $0.60) + (500 × $1.20) = $4,525;
[(500 × $1.20) ÷ $4,525] × $3,000 = $398 ÷ 500 = $0.796.
[(500 × $1.20) ÷ $4,525] × $3,000 = $398 ÷ 500 = $0.796.
89. a $2.5
million – $2.3 million = $200,000.
90. c $2.5
million – $2.2 million = $300,000.
91. c ($4.00
– $3.10) × 100,000 = $90,000.
92. c No
gain or loss since 12/31 price ($5.60) > contract price ($5,00).
93. b ($5.00
– $4.60) × 1,000 = $400.
94. a ($50,000
+ $150,000) – ($300,000 ÷ 5/3) – $3,000 = $17,000.
95. a ($100,000
+ $300,000) – ($600,000 ÷ 5/3) – $6,000 = $34,000.
96. d (1
+ .2)C = 1,980,000; C = $1,650,000.
97. d 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.
98. a $360,000
+ ($420,000 – $240,000) = $540,000.
99. a 
100. b COGS
= $300,000 ÷ 1.25 = $240,000
($220,000
+ $172,000 – $8,000) – $240,000 = $144,000.
101. c COGS
= $2,000,000 × .75 = $1,500,000
$800,000
+ $1,600,000 – $1,500,000 = $900,000.
102. b $900,000
– ($800,000 × .80) = $260,000.
$300,000
103. a $50,000
+ $250,000 – ————— = $60,000.
1.25
104. a ($15,000 × 40%) + $13,000 + ($7,600 –
$6,400) = $20,200.
105. c 25%
÷ (100% – 25%) = 33%.
106. c $650,000
– ($650,000 ÷ 1.20) = $108,333.
107. d ($320,000
+ $85,000) – [$250,000 × (1 – .40)] = $255,000.
108. d ($680,000
+ $165,000) – [$360,000 × (1 – .40)] = $629,000.
109. c $1,650,000
+ $683,000 + $78,000 – [$1,210,000 × (1 – .30)] = $1,564,000.
110. a $198,000
+ $1,100,000 + $24,000 – $1,050,000 – $36,000 = $236,000;
($130,000 + $685,000 + $43,000) ÷ ($198,000 + $1,100,000 + $24,000) = .649;
$236,000 × .649 = $153,164.
($130,000 + $685,000 + $43,000) ÷ ($198,000 + $1,100,000 + $24,000) = .649;
$236,000 × .649 = $153,164.
111. c $99,000
+ $865,600 + $69,000 – $811,000 = $222,600;
($65,500 + $568,000 + $26,500) ÷ ($99,000 + $865,600 + $69,000) = 63.9%;
$222,600 × .639 = $142,241.
($65,500 + $568,000 + $26,500) ÷ ($99,000 + $865,600 + $69,000) = 63.9%;
$222,600 × .639 = $142,241.
112. b $326,900
+ $1,386,100 + $2,000 – $1,302,000 – $96,300 = $316,700;
($265,600 + $1,068,600 + $63,900) ÷ ($326,900 + $1,386,100 + $2,000) = 81.5%;
$316,700 × .815 = $258,111.
($265,600 + $1,068,600 + $63,900) ÷ ($326,900 + $1,386,100 + $2,000) = 81.5%;
$316,700 × .815 = $258,111.
113. b Cost: $30,000 + $145,000 + $2,500 = $177,500.
Retail: $50,000 + $200,000 + $8,500 = $258,500.
114. b $70,000
+ $320,000 + $20,000 – $14,000 – $336,000 = $60,000.
115. a Cost: $49,000 + $224,000 + $6,000 = $279,000.
Retail: $70,000 + $320,000 + $20,000 = $410,000.
116. b Conceptual.
$49,000
*117. b ————
× $60,000 = $42,000.
$70,000
*118. c Conceptual.
119. a $3,600
+ $114,000 + $18,000 – $4,000 – $70,200 – $1,600 – $2,800 – $2,600
=
$54,400.
120. a $3,600
+ $94,000 + $18,000 – $4,000 – $70,200 – $1,600 – $2,800 – $2,600
=
$34,400.
121. c $375,000
÷ [($60,000 + $90,000) ÷ 2] = 5; 365 ÷ 5 = 73.0.
122. c $385,000
÷ [($60,000 + $80,000) ÷ 2] = 5.5; 365 ÷ 5.5 = 66.4.
123. b
$600,000 ÷ [($80,000 + $120,000) ÷ 2] = 6 times
124. d $1,879,400 ÷ [($360,000 + $411,000) ÷
2] = 4.88.
125. d Cost: $78,000 + $295,000 + $5,000 = $378,000.
Retail: $122,000 + $415,000 + $15,000 = $552,000.
126. d $122,000
+ $415,000 – $2,000 + $15,000 – $20,000 – $390,000 = $140,000.
127. a $140,000
× .685 = $95,900.
*128. c Cost: $295,000 + $5,000 = $300,000.
Retail: $415,000 + $15,000 – $20,000 = $410,000.
*129. a Base
year price = EI = 
$122,000
@ cost = $78,000
$3,000
× .732* × 1.12 = 2,460
$80,460
$300,000
*
————— = .732
$410,000
*130. b 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.
*131. a 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
132. d $250,000
– $225,000 (RC) = $25,000.
133. b Conceptual.
134. b Conceptual.
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