Data related to the inventories of Alpine Ski Equipment and Supplies is presented below:
(skis, boots, apparel, supplies)
selling price: (180,000; 150,000; 120,000; 60,000)
cost: (128,000; 133,000; 90,000; 45,000)
replacement cost: (120,000; 133,000; 110,000; 41,000)
sales commission: (120,000; 130,000; 110,000; 41,000)
normal gross profit ratio: (20%, 20%, 15%, 15%)
In applying the LCM rule, the inventory of boots would be valued at:
Detailed Answer
Correct answer: (C)
$130,000
2
Data related to the inventories of Alpine Ski Equipment and Supplies is presented below:
(skis, boots, apparel, supplies)
selling price: (180,000; 150,000; 120,000; 60,000)
cost: (128,000; 133,000; 90,000; 45,000)
replacement cost: (120,000; 133,000; 110,000; 41,000)
sales commission: (120,000; 130,000; 110,000; 41,000)
normal gross profit ratio: (20%, 20%, 15%, 15%)
In applying the LCM rule, the inventory of apparel would be valued at:
Detailed Answer
Correct answer: (B)
$90,000.
3
Data related to the inventories of Alpine Ski Equipment and Supplies is presented below:
(skis, boots, apparel, supplies)
selling price: (180,000; 150,000; 120,000; 60,000)
cost: (128,000; 133,000; 90,000; 45,000)
replacement cost: (120,000; 133,000; 110,000; 41,000)
sales commission: (120,000; 130,000; 110,000; 41,000)
normal gross profit ratio: (20%, 20%, 15%, 15%)
In applying the LCM rule, the inventory of supplies would be valued at:
Detailed Answer
Correct answer: (A)
$45,000.
4
When using the gross profit method to estimate ending inventory, it is not necessary to know:
Detailed Answer
Correct answer: (C)
Cost of goods sold.
5
On July 8, a fire destroyed the entire merchandise inventory on hand of Larrenaga Wholesale
Corporation. The following information is available:
sales Jan. 1- July 8: 700,000
inventory Jan. 1: 130,000
purchases Jan.1- July 8: 640,000
gross profit ratio : 30%
What is the estimated inventory on July 8 immediately prior to the fire?
Detailed Answer
Correct answer: (D)
$280,000
6
So. California Inc., through no fault of its own, lost an entire plant due to an earthquake on May 1, 2011. In preparing their insurance claim on the inventory loss, they developed the following data: Inventory January 1, 2011, $300,000; sales and purchases from January 1, 2011, to May 1, 2011, $1,300,000 and $875,000, respectively. So. California consistently reports a 40% gross profit. The estimated inventory on May 1, 2011, is:
Detailed Answer
Correct answer: (C)
$395,000.
7
Beginning inventory 10 units @ $10 per unit
First purchase 35 units @ $11 per unit
Second purchase 40 units @ $12 per unit
Third purchase 15 units @ $13 per unit
If 83 units are sold, the value of the ending inventory under periodic FIFO would be
Detailed Answer
Correct answer: (C)
$219
8
Beginning inventory 10 units @ $10 per unit
First purchase 35 units @ $11 per unit
First sale 20 units
Second purchase 40 units @ $12 per unit
Second sale 35 units
Third purchase 15 units @ $13 per unit
The value of the ending inventory using a perpetual inventory system with the LIFO valuation method is
Detailed Answer
Correct answer: (C)
$520
9
Beginning inventory 10 units @ $10 per unit
First purchase 35 units @ $11 per unit
First sale 20 units
Second purchase 40 units @ $12 per unit
Second sale 35 units
Third purchase 15 units @ $13 per unit
The value of the ending inventory using a perpetual inventory system with the FIFO valuation method is
Detailed Answer
Correct answer: (A)
$555
10
Inventory at the end of the current period was erroneously understated. Which of the following is true as a result of the understatement?
Detailed Answer
Correct answer: (D)
net income at the end of the following year will be overstated