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Exam 9: Inventory and Cost of Goods Sold

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Question 51

Multiple Choice

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When valuing raw materials inventory at lower of cost or market, what is the general meaning of the term "market"?

A) Net realizable value
B) Net realizable value less a normal profit margin
C) Current replacement cost
D) Discounted present value

E) C) and D)
F) All of the above

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Question 52

Multiple Choice

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The Garrett Corporation uses the lower-of-cost-or-market method to value inventory. Data regarding the items in work-in-process inventory are presented below. See information regarding the Garrett Corporation above. When valuing the pens, the market value to be used in the lower-of-cost-or- market comparison is

A) $22,200.
B) $31,200.
C) $16,800.
D) $18,800.

E) C) and D)
F) All of the above

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Question 53

Multiple Choice

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If the replacement cost of a unit of inventory has declined below original cost, but the replacement cost exceeds net realizable value, the amount to be used for purposes of inventory valuation is

During periods of rising prices, when the FIFO inventory cost flow method is used, a perpetual inventory system would

The following information was obtained from the accounts of Cox Company: Given this information, the cost of goods available for sale is

Which inventory costing method would not be appropriate for a manufacturer using a perpetual inventory system?

The following data are available for Castle Gate Company: The company has experienced a temporary LIFO liquidation by not maintaining the base year inventory of 20,000 units. The company uses a perpetual inventory system. Prepare the entries to account for the temporary liquidation and the replacement of the liquidated units assuming that 8,000 units will be replaced at $1.60 per unit

The inventory account of Duke Company at December 31, 2011, included the following items: Based on this information, the inventory account at December 31, 2011, should be reduced by what amount?

A markup of 25 percent on cost is equivalent to what markup on selling price? (rounded)

The following information is available for Carter Corporation for the month of June: Given this information, the ending inventory balance using the average cost method is

The 49ers Company began its operations in early 2011. The company carries five different types of inventory which are listed below along with other relevant data. The company values its inventory at the lower of cost or market. At December 31, 2011, 49ers has exactly one unit of each item in ending inventory.

If goods shipped FOB destination are in transit at the end of the year, they should be included in the inventory balance of the

Jupiter Company prepares monthly income statements. A physical inventory is taken only at year-end; hence, month-end inventories must be estimated. All sales are made on account. The rate of markup on cost is 50 percent. The following information relates to the month of May: The estimated cost of the May 31 inventory is

The use of the gross profit method assumes

Campbell's Clothing Store sells jeans. During January 2011, its inventory records for one brand of designer jeans were as follows: See information for Campbell's Clothing Store above. Using this information, periodic FIFO cost of goods sold is

Which statement is true about the gross profit method?

Purchases and sales during a recent period for Coleman, Inc. were: Beginning inventory was 100 units at $1 each. See information for Coleman, Inc.above. Given this information, what is the cost per unit available for sale during the year when using the average cost method (rounded to the nearest cent) ?

The following data relate to the first three years of operation for the Lewis Company: Compute the ending inventory under LIFO for each year. (Ignore income taxes.)

On October 31, a flood at Payne Company's only warehouse caused severe damage to its entire inventory. Based on recent history, Payne has a gross profit of 25 percent of net sales. The following information is available from Payne's records for the ten months ended October 31: A physical inventory disclosed usable damaged goods which Payne estimates can be sold for $70,000. Using the gross profit method, the estimated cost of goods sold for the ten months ended October 31 should be

The lower-of-cost-or-market inventory procedure would be expected to result in the lowest inventory valuation when applied to