FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 9: Inventories: Additional Issues

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 51

Multiple Choice

Review LaterAdd Note

Review Later

Harvey's Junk Jewelry started business January 1, 2018, and uses the LIFO retail method to estimate ending inventory. Listed below is data accumulated for the year ended December 31, 2018: -The estimated ending inventory at retail is:

A) $27,300.
B) $25,000.
C) $26,600.
D) $26,400.

E) A) and B)
F) C) and D)

Correct Answer

verified

Show Answer

Question 52

True/False

Review LaterAdd Note

Review Later

If the quantity of goods held in inventory decreased during the period, the dollar amount of ending inventory can't exceed the dollar amount of beginning inventory.

A) True
B) False

Correct Answer

verified

Show Answer

Question 53

Essay

Review LaterAdd Note

Novelli's Nursery has developed the following data in order to calculate the lower of cost or net realizable value for its products. The individual products are listed within the categories of trees. The costs to sell are 10% of selling price. -Required: Determine the reported inventory value assuming the lower of cost or net realizable value rule is applied to the total inventory.

When changing from the average cost method to FIFO, the company:

Retrospective treatment of prior years' financial statements is required when there is a change from:

A change from LIFO to any other inventory method is accounted for retrospectively.

Poppy Co. uses a periodic inventory system. Beginning inventory on January 1 was understated by $30,000, and its ending inventory on December 31 was understated by $17,000. In addition, a purchase of merchandise costing $20,000 was incorrectly recorded as a $2,000 purchase. None of these errors were discovered until the next year. As a result, Poppy's cost of goods sold for this year was:

Under the LIFO retail method, which of the following are not included in the denominator of the cost-to-retail conversion percentage?

For companies that use FIFO or average cost, inventory is valued at the lower of cost or net realizable value at the end of the reporting period.

In the following questions, inventory errors are noted for 2018. Assume that the errors are not discovered until 2019, and that the company uses a periodic inventory system. Indicate the effect of the error, if any, on the accounts noted in the columns, using the following code: U = Understated; O = Overstated; NE = No effect - $\begin{array} { | l | l | l | } \hline { \text { Error } } & \text { Cost of goods sold } & \text { Retained earnings } \\\hline \text { Unrecorded purchases } & & \\\hline\end{array}$

Under the retail method, in determining the cost-to-retail percentage for the current year:

Harvey's Junk Jewelry started business January 1, 2018, and uses the LIFO retail method to estimate ending inventory. Listed below is data accumulated for the year ended December 31, 2018: - The denominator for the current period's cost-to-retail percentage is:

The following disclosure note appeared in the 2018 annual report to shareholders of Upton Systems Inc. Inventories are stated at the lower of cost or net realizable value. Cost is computed using standard cost, which approximates actual cost, on a first-in, first-out basis. The Company provides inventory allowances based on excess and obsolete inventories. Another disclosure note in the annual report stated: The Company recorded a provision for inventory, including purchase commitments, totaling $1.40 billion during fiscal 2018, which included an additional excess inventory charge as previously discussed. This additional excess inventory charge was due to a sudden and significant decrease in demand for the Company's products and was calculated in accordance with the Company's accounting policy. A skeptic may conclude that Upton's policy and practices threaten earnings quality. Discuss how it may do so.

A reduction in reported inventory due to market value falling below cost would reduce net income in the current period.

The gross profit method and retail method are both ways of estimating ending inventory. Briefly explain how the two methods differ.

Data below for the year ended December 31, 2018, relates to Houdini Inc. Houdini started business January 1, 2018, and uses the LIFO retail method to estimate ending inventory. -Estimated ending inventory at retail is:

On August 31, 2018, Hurricane Chuck destroyed Bedford Craft Mart's entire inventory. The following information is available from its accounting records: Required: Assuming that Bedford estimates the cost of destroyed inventory at $510,000, compute gross profit margin % that Bedford uses in estimating inventory.

The disposal costs are 20% of the selling price and the normal profit margin on all feed is 25% of the selling price. -Required: Determine the reported inventory value assuming the lower of cost or market rule is applied to categories of feed products.

For companies using LIFO, inventory is valued at:

Data related to the inventories of Kimzey Medical Supply are presented below: -In applying the lower of cost or market rule, the inventory of surgical equipment would be valued at: