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Exam 9: Property, Plant, and Equipment and Intangible Assets: Acquisition and Disposition

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Question 51

Multiple Choice

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How much loss on purchase commitment will Johnson recognize in 2013?

A) $10,000.
B) $20,000.
C) $30,000.
D) None.

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

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Question 52

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The estimated ending inventory at retail is:

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

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

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Question 53

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Under the dollar-value LIFO retail method, to determine if the increase in the value of inventory was due to an increase in quantities:

What should be the carrying value of Sullivan's inventory if the company prepares its financial statements according to International Financial Reporting Standards?

Determine the balance sheet inventory carrying value for Products A, B, and C.

Losses on reduction to LCM may be charged to either cost of goods sold or to a current loss account.

The conventional cost-to-retail percentage (rounded) is:

Under the retail inventory method:

In applying the LCM rule, the inventory of skis would be valued at:

Net realizable value is selling price less costs of completion and disposal.

Prunedale Co. uses a periodic inventory system. Beginning inventory on January 1 was overstated by $32,000, and its ending inventory on December 31 was understated by $62,000. These errors were not discovered until the next year. As a result, Prunedale's cost of goods sold for this year was:

Prunedale 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, Prunedale's cost of goods sold for this year was:

California Inc., through no fault of its own, lost an entire plant due to an earthquake on May 1, 2013. In preparing its insurance claim on the inventory loss, the company developed the following data: Inventory January 1, 2013, $300,000; sales and purchases from January 1, 2013, to May 1, 2013, $1,300,000 and $875,000, respectively. California consistently reports a 40% gross profit. The estimated inventory on May 1, 2013, is:

Hawkeye Auto Parts uses the retail method to estimate inventories. Data for the first six months of 2013 include: beginning inventory at cost and retail were $55,000 and $100,000, net purchases at cost and retail were $785,000 and $1,300,000, and sales during the first six months totaled $800,000. The estimated inventory at June 30, 2013, would be:

Required: Determine the balance sheet inventory carrying value assuming the LCM rule is applied to the total inventory.

Briefly explain the financial reporting required when a company changes to or from the LIFO inventory method.

An argument against the use of LCM is its lack of:

Using the dollar-value LIFO retail method for inventory:

To the nearest thousand, estimated ending inventory is:

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