Sunday, July 28, 2013

Inventory Valuation & Biological Assets


  75.     Oslo Corporation has two products in its ending inventory, each accounted for at the lower of cost or market. Specific data with respect to each product follows:
                                                                     Product #1         Product #2
Selling price                                                      $60                      $130
Historical cost                                                     40                          70
Cost to sell                                                          10                          26
Cost to complete                                                 15                          40
In pricing its ending inventory using the lower-of-cost-or-net realizable value, what unit values should Oslo use for products #1 and #2, respectively?
a.   $35 and $64.
b.   $50 and $104.
c.   $40 and $70.
d.   $45 and $90.

  76.     Muckenthaler Company sells product 2005WSC for $25 per unit. The cost of one unit of 2005WSC is $18. The estimated cost to complete a unit is $4, and the estimated cost to sell is $6. At what amount per unit should product 2005WSC be reported, applying lower-of-cost-or-net realizable value?
a.   $20.
b.   $15.
c.   $18.
d.   $19.

  77.     Lexington Company sells product 1976NLC for $45 per unit. The cost of one unit of 1976NLC is $36. The estimated cost to complete a unit is $8, and the estimated cost to sell is $5. At what amount per unit should product 1976NLC be reported, applying lower-of-cost-or-net realizable value?
a.   $36.
b.   $32.
c.   $37.
d.   $40.

  78.     Given the acquisition cost of product Z is $32, the cost to complete product Z is $9.00, the cost to sell product Z is $5, and the selling price for product Z is $50.00, what is the proper per unit inventory price for product Z?
a.   $32.
b.   $45.
c.   $36.
d.   $41.

  79.     Given the acquisition cost of product ALPHA is $85, the cost to complete product ALPHA is $8, the cost to sell product ALPHA is $6, and the selling price for product ALPHA is $97, what is the proper per unit inventory price for product ALPHA?
a.   $85.
b.   $83
c.   $79.
d.   $89.



  80.     Given the acquisition cost of product Dominoe is $86, the cost to complete for product Dominoe is $10, the cost to sell product Dominoe is $8, and the selling price for product Dominoe is $101, what is the proper per unit inventory price for product Dominoe?
a.   $91.
b.   $93.
c.   $83.
d.   $86.

  81.     Given the historical cost of product Z is $150, the selling price of product Z is $190, costs to sell product Z are $21, and the cost to complete product Z is $30, what is the net realizable value that should be used in the lower-of-cost-or-net realizable value comparison?
a.   $160.
b.   $169.
c.   $139.
d.   $150.
  82.     Given the historical cost of product Z is $150, the selling price of product Z is $190, costs to sell product Z are $11, and the cost to complete product Z is $20, what is the amount that should be used to value the inventory under the lower-of-cost-or-net realizable value method?
a.   $130.
b.   $150.
c.   $159.
d.   $139.

  83.     Given the historical cost of product Dominoe is $65, the selling price of product Dominoe is $90, costs to sell product Dominoe are $16, and the cost to complete the product is $14, what is the amount that should be used to value the inventory under the lower-of-cost-or-net realizable value method?
a.   $65.
b.   $76.
c.   $60.
d.   $74.

  84.     Robust Inc. has the following information related to an item in its ending inventory. Product 66 has a cost of $6,500, a selling price of $7,100, a cost to complete of $600, and a cost to sell of $400. What is the lower-of-cost-or-net realizable value for product 66?
a.   $5,900.
b.   $6,100.
c.   $6,500.
d.   $6,700.

  85.     Robust Inc. has the following information related to an item in its ending inventory. Packit (Product # 874) has a cost of $498, a selling price of $536, a cost to complete of $62, and a cost to sell of $28. What is the lower-of-cost-or-net realizable inventory value for Packit?
a.   $446.
b.   $498.
c.   $536.
d.   $474.



  86.     Robust Inc. has the following information related to an item in its ending inventory. Acer Top has a cost of $502, a selling price of $568, a cost to complete of $53, and a cost to sell of $38. What is the lower-of-cost-or-net realizable inventory value for Acer Top?
a.   $515.
b.   $502.
c.   $477.
d.   $530.

  87.     Rios, Inc. uses International Financial Reporting Standards (IFRS). In 2010, Rios, Inc. experienced a decline in the value of its inventory resulting in a write-down of its inventory from $240,000 to $200,000. The company used the loss method in 2010 to record the necessary adjustment and uses an allowance account to reduce inventory to NRV. In 2011, market conditions have improved dramatically and Rios, Inc.’s inventory increases to an NRV of $216,000. Which of the following will Rios, Inc. record in 2011?
a.   A debit to Recovery of Inventory Loss for $16,000.
b.   A credit to Recovery of Inventory Loss for $24,000.
c.   A debit to Allowance to Reduce Inventory to NRV of $16,000.
d.   A credit to Allowance to Reduce Inventory to NRV of $24,000.

  88.     Dub Dairy produces milk to sell to local and national ice cream producers. Dub Dairy began operations on January 1, 2011 by purchasing 840 milk cows for $1,176,000. The company controller had the following information available at year end relating to the cows:
            Milking cows
            Carrying value, January1, 2011                                             $1,176,000
            Change in fair value due to growth and price changes               365,000
            Decrease in fair value due to harvest                                           (42,000)
            Milk harvested during 2011                                                          $54,000
           
            At December 31, 2011, what is the value of the milking cows on Dub Dairy’s statement of financial position?
a.   $1,176,000
b.   $1,541,000
c.   $1,134,000
d.   $1,499,000

  89.     Dub Dairy produces milk to sell to local and national ice cream producers. Dub Dairy began operations on January 1, 2011 by purchasing 840 milk cows for $1,176,000. The company controller had the following information available at year end relating to the cows:
            Milking cows
            Carrying value, January1, 2011                                             $1,176,000
            Change in fair value due to growth and price changes               365,000
            Decrease in fair value due to harvest                                           (42,000)
            Milk harvested during 2011 but not yet sold                                 $54,000

            On Dub Dairy’s income statement for the year ending December 31, 2011, what amount of unrealized gain on biological assets will be reported?
a.   $ -0-
b.   $365,000
c.   $323,000
d.   $54,600
  90.     Dub Dairy produces milk to sell to local and national ice cream producers. Dub Dairy began operations on January 1, 2011 by purchasing 840 milk cows for $1,176,000. The company controller had the following information available at year end relating to the cows:
            Milking cows
            Carrying value, January1, 2011                                             $1,176,000
            Change in fair value due to growth and price changes               365,000
            Decrease in fair value due to harvest                                           (42,000)
            Milk harvested during 2011 but not yet sold                                 $54,000

            On Dub Dairy’s income statement for the year ending December 31, 2011, what amount of unrealized gain on harvested milk will be reported?
a.   No gain is reported until the milk is sold.
b.   $12,000
c.   $54,000
d.   $311,000

  91.     Braum Dairy produces milk to sell to local and national ice cream producers. Braum Dairy began operations on January 1, 2011 by purchasing 650 milk cows for $780,000. The company controller had the following information available at year end relating to the cows:
            Milking cows
            Carrying value, January1, 2011                                                $780,000
            Change in fair value due to growth and price changes               242,000
            Decrease in fair value due to harvest                                           (28,000)
            Milk harvested during 2011 but not yet sold                                 $36,200

            On Braum Dairy’s income statement for the year ending December 31, 2011, what amount of unrealized gain on biological assets will be reported?
a.   $ -0-
b.   $242,000
c.   $214,000
d.   $36,200

  92.     Braum Dairy produces milk to sell to local and national ice cream producers. Braum Dairy began operations on January 1, 2011 by purchasing 650 milk cows for $780,000. The company controller had the following information available at year end relating to the cows:
            Milking cows
            Carrying value, January1, 2011                                                $780,000
            Change in fair value due to growth and price changes               242,000
            Decrease in fair value due to harvest                                           (28,000)
            Milk harvested during 2011 but not yet sold                                 $36,200

            On Braum Dairy’s income statement for the year ending December 31, 2011, what amount of unrealized gain on harvest milk will be reported?
a.   No gain is reported until the milk is sold.
b.   $8,200
c.   $36,200
d.   $205,800.


  93.     Lucy’s Llamas purchased 1,000 llamas on January 1, 2011. These llamas will be sheared semiannually and their wool sold to specialty clothing manufacturers. The llamas were purchased for $148,000. During 2011 the change in fair value due to growth and price changes is $9,400, the wool harvested but not yet sold is valued at net realizable value of $18,000, and the change in fair value due to harvest is ($1,150). What is the value of the llamas on Lucy’s Llamas statement of financial position on June 30, 2011?
a.   $156,250
b.   $148,000
c.   $146,850
d.   $128,850

  94.     Lucy’s Llamas purchased 1,000 llamas on January 1, 2011. These llamas will be sheared semiannually and their wool sold to specialty clothing manufacturers. The llamas were purchased for $148,000. During 2011 the change in fair value due to growth and price changes is $9,400, the wool harvested but not yet sold is valued at net realizable value of $18,000, and the change in fair value due to harvest is ($1,150). On Lucy’s Llamas income statement for the year ending December 31, 2011, what amount of unrealized gain on biological assets will be reported?
a.   $26,250
b.   $27,400
c.   $9,400
d.   $8,250

  95.     Lenny’s Llamas purchased 1,500 llamas on January 1, 2011. These llamas will be sheared semiannually and their wool sold to specialty clothing manufacturers. The llamas were purchased for $222,000. During 2011 the change in fair value due to growth and price changes is $14,100, the wool harvested but not yet sold is valued at net realizable value of $27,000, and the change in fair value due to harvest is ($1,750). What is the value of the llamas on Lenny’s Llamas statement of financial position on June 30, 2011?
a.   $234,350
b.   $222,000
c.   $220,250
d.   $193,250

  96.     Lenny’s Llamas purchased 1,000 llamas on January 1, 2011. These llamas will be sheared semiannually and their wool sold to specialty clothing manufacturers. The llamas were purchased for $222,000. During 2011 the change in fair value due to growth and price changes is $14,100, the wool harvested but not yet sold is valued at net realizable value of $27,000, and the change in fair value due to harvest is ($1,750). On Lenny’s Llamas income statement for the year ending December 31, 2011, what amount of unrealized gain on biological assets will be reported?
a.   $39,350
b.   $41,100
c.   $14,100
d.   $12,350



  97.     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.

  98.     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.

  99.     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

100.     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.



101.     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.

102.     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.

103.     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 Holding Loss for $200,000 and credit Purchase Commitment Liability for $200,000.
b.   Debit Purchase Commitment Liability for $200,000 and credit Unrealized Holding Gain for $200,000.
c.   Debit Unrealized Holding Loss for $2,300,000 and credit Purchase Commitment Liability for $2,300,000.
d.   No journal entry is required.

104.     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 Holding Loss for $300,000, and credit Cash for $2,500,000.
c.   Debit Inventory for $2,200,000, debit Purchase Commitment Liability for $300,000 and credit Cash for $2,500,000.
d.   Debit Inventory for $2,500,000, and credit Cash for $2,500,000.



105.     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 Inventory..............................................................      400,000
                              Accounts Payable................................................                              400,000
            b.   Cocoa Inventory..............................................................      310,000
                  Loss on Purchase Commitments....................................        90,000
                              Accounts Payable................................................                              400,000
            c.   Unrealized Holding Loss..................................................        90,000
                              Purchase Commitments Liability.........................                                90,000
            d.   No entry would be necessary in 2010

106.     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.

107.     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.

108.     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.



109.     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 110 and 111.
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.

110.     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.

111.     Merchandise purchases for July are anticipated to be
a.   $1,632,000.
b.   $2,076,000.
c.   $1,700,000.
d.   $1,730,000.

112.     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.

113.     A markup of 40% on cost is equivalent to what markup on selling price?
a.   29%
b.   40%
c.   60%
d.   71%


114.     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.

115.     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.

116.     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.

117.     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.

118.     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.


119.     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.

120.     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. From 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.

121.     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.

122.     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.

123.     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.



124.     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.

125.     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.

126.     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-net realizable value, 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 127 through 129.

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



127.     The ending inventory at retail should be
a.   $74,000.
b.   $60,000.
c.   $64,000.
d.   $42,000.

128.     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.

129.     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.

130.     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

131.     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



Use the following information for questions 132 through 134.

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

132.     If the ending inventory is to be valued at approximately lower-of-average-cost-or-net realizable value, 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.

133.     The ending inventory at retail should be
a.   $160,000.
b.   $150,000.
c.   $144,000.
d.   $140,000.

134.     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.

135.     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.



136.     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.

137.     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.

138.     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.


Multiple Choice Answers—Computational
Item
Ans.
Item
Ans.
Item
Ans.
Item
Ans.
Item
Ans.
Item
Ans.
Item
Ans.
75.
a
85.
a
95.
a
105.
c
115.
c
125.
b
135.
c
76.
b
86.
c
96.
d
106.
c
116.
b
126.
b
136.
c
77.
b
87.
c
97.
b
107.
b
117.
a
127.
b
137.
b
78.
A
88.
d
98.
b
108.
a
118.
c
128.
a
138.
d
79.
B
89.
c
99.
c
109.
a
119.
c
129.
b


80.
C
90.
c
100.
b
110.
d
120.
d
130.
a


81.
C
91.
c
101.
d
111.
d
121.
d
131.
a


82.
B
92.
c
102.
a
112.
a
122.
c
132.
d


83.
C
93.
a
103.
a
113.
a
123.
a
133.
d


84.
B
94.
d
104.
c
114.
b
124.
c
134.
a



  87.          c          $216,000 – $200,000 = $16,000.

  88.          d          $1,176,000 + $365,000 – $42,000= $1,499,000.

  89.          c          $365,000 – $42,000 = $323,000.

  90.          c          $54,000.

  91.          c          $242,000 – $28,000 = $214,000.

  92.          c          $36,200.

  93.          a          $148,000 + $9,400 – $1,150 = $156,250.

  94.          d          $9,400 – $1,150 = $8,250.

  95.          a          $222,000 – $14,100 – $1,750= $234,350.

  96.          d          $14,100 - $1,750 = $12,350.

  97.          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.

  98.          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.

  99.          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

100.          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.

101.          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.

102.          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.

103.          a          $2.5 million – $2.3 million = $200,000.

104.          c          $2.5 million – $2.2 million = $300,000.

105.          c          ($4.00 – $3.10) × 100,000 = $90,000.


            DERIVATIONS — Computational  (cont.)

No.    Answer    Derivation
106.          c          No gain or loss since 12/31 price ($5.60) > contract price ($5,00).

107.          b          ($5.00 – $4.60) × 1,000 = $400.

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

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

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

111.          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.

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

113.          a         

114.          b          COGS = $300,000 ÷ 1.25 = $240,000
                             ($220,000 + $172,000 – $8,000) – $240,000 = $144,000.

115.          c          COGS = $2,000,000 × .75 = $1,500,000
                             $800,000 + $1,600,000 – $1,500,000 = $900,000.

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

                                                                   $300,000
117.          a          $50,000 + $250,000 – —————   = $60,000.
                                                                      1.25

118.          c          25% ÷ (100% – 25%) = 33%.

119.          c          $650,000 – ($650,000 ÷ 1.20) = $108,333.

120.          d          ($320,000 + $85,000) – [$250,000 × (1 – .40)] = $255,000.

121.          d          ($680,000 + $165,000) – [$360,000 × (1 – .40)] = $629,000.

122.          c          $1,650,000 + $683,000 + $78,000 – [$1,210,000 × (1 – .30)] = $1,564,000.

123.          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.

124.          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.


            DERIVATIONS — Computational  (cont.)

No.    Answer    Derivation
125.          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.

126.          b          Cost:     $30,000 + $145,000 + $2,500 = $177,500.
                             Retail:   $50,000 + $200,000 + $8,500 = $258,500.

127.          b          $70,000 + $320,000 + $20,000 – $14,000 – $336,000 = $60,000.

128.          a          Cost:     $49,000 + $224,000 + $6,000 = $279,000.
                             Retail:   $70,000 + $320,000 + $20,000 = $410,000.

129.          b          Conceptual.

130.          a          $3,600 + $114,000 + $18,000 – $4,000 – $70,200 – $1,600 – $2,800 – $2,600
                             = $54,400.

131.          a          $3,600 + $94,000 + $18,000 – $4,000 – $70,200 – $1,600 – $2,800 – $2,600
                             = $34,400.

132.          d          Cost:     $78,000 + $295,000 + $5,000 = $378,000.
                             Retail:   $122,000 + $415,000 + $15,000 = $552,000.

133.          d          $122,000 + $415,000 – $2,000 + $15,000 – $20,000 – $390,000 = $140,000.

134.          a          $140,000 × .685 = $95,900.

135.          c          $375,000 ÷ [($60,000 + $90,000) ÷ 2] = 5; 365 ÷ 5 = 73.0.

136.          c          $385,000 ÷ [($60,000 + $80,000) ÷ 2] = 5.5; 365 ÷ 5.5 = 66.4.

137.          b          $600,000 ÷ [($80,000 + $120,000) ÷ 2] = 6 times

138.          d          $1,879,400 ÷ [($360,000 + $411,000) ÷ 2] = 4.88.

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