ACC 304 Week 3 Quiz 02 Chapter 09

ACC 304 Week 3 Quiz 02 Chapter 09
Multiple Choice Question 72

Given the acquisition cost of product ALPHA is $34, the net realizable value for product ALPHA
is $33.50, the normal profit for product ALPHA is $2.50, and the market value (replacement
cost) for product ALPHA is $29.50, what is the proper per unit inventory price for product
ALPHA?
o
o
o
o
$33.50
$34.00
$29.50
$31.00

Lexington Company sells product 1976NLC for $60 per unit. The cost of one unit of 1976NLC
is $54, and the replacement cost is $52. The estimated cost to dispose of a unit is $12, and the
normal profit is 40%. At what amount per unit should product 1976NLC be reported, applying
lower-of-cost-or-market?
o
o
o
o
$54
$24
$48
$52

Barker Pet supply uses the conventional retail method to determine its ending inventory at cost.
Assume the beginning inventory at cost (retail) were $531,200 ($653,800), purchases during the
current year at cost (retail) were $2,137,200 ($2,772,200), freight-in on these purchases totaled
$127,800, sales during the current year totaled $2,704,000, and net markups (markdowns) were
$4,000 ($192,600). What is the ending inventory value at cost?
o
o
o
o
$722,000
$588,430
$533,400
$434,721
Page 1 of 6

Which of the following is not an acceptable approach in applying the lower-of-cost-or-market
method to inventory?
o
o
o
o
Total of the inventory

Individual item
Inventory location
Categories of inventory items

The following data concerning the retail inventory method are taken from the financial records of
Welch Company.
Beginning inventory
Purchases
Freight-in
Net markups
Net markdowns
Sales
Cost
$147,000
672,000
18,000
----------------------------
Retail
$210,000
960,000
---------60,000
42,000
1,008,000
If the foregoing figures are verified and a count of the ending inventory reveals that merchandise
actually on hand amounts to $108,000 at retail, the business has
o
o
o
o
Sustained a loss.
No gain or loss as there is close coincidence of the inventories.
None of these answer choices are correct.
Realized a windfall gain.

RS Corporation, a manufacturer of ethnic foods, contracted in 2014 to purchase 600 pounds of a
spice mixture at $5.00 per pound, delivery to be made in spring of 2015. By 12/31/14, the price
per pound of the spice mixture had risen to $5.40 per pound. In 2014, RS should recognize
o
o
o
o
No gain or loss.
A gain of $240.
A loss of $3,000.
A loss of $240.
Page 2 of 6

Goren Corporation had the following amounts, all at retail:
Beginning inventory
$ 3,600
Purchases
$110,000
Purchase returns
6,000
Net markups
Abnormal shortage
4,000
Net markdowns
2,800
Sales returns
1,800
Normal shortage
2,600
Sales
77,000
Employee discounts
1,600
18,000
What is Goren's ending inventory at retail?

o
o
o
o
$39,400
$41,000
$43,400
$42,600

If a unit of inventory has declined in value below original cost, but the market value exceeds net
realizable value, the amount to be used for purposes of inventory valuation is
o
o
o
o
Net realizable value less a normal profit margin.

Market value.
Net realizable value.
Original cost.
Page 3 of 6

For 2014, cost of goods available for sale for Tate Corporation was $2,700,000. The gross profit
rate on sales was 20%. Sales for the year were $2,400,000. What was the amount of the ending
inventory?
o
o
o
o
$540,000
$480,000
$0
$780,000
IFRS Multiple Choice Question 01

Where is the authoritative IFRS guidance related to accounting and reporting for inventories
found?
o
o
o
o
IAS 41
All of these standards deal with inventory
IAS 2
IAS 18

Which of the following is not required when using the retail inventory method?
o All inventory items must be categorized according to the retail markup percentage
which reflects the items selling price.
o A record of the total cost and retail value of the goods purchased.
o A record of the total cost and retail value of the goods available for sale.
o Total sales amount for the period.

What is the rationale behind the ceiling when applying the lower-of-cost-or-market method to
inventory?
o
o
o
o
Prevents understatement of the inventory value.

Prevents overstatement of the value of obsolete or damaged inventories.
Allows for items to be valued at replacement cost.
Allows for a normal profit to be earned.
Page 4 of 6

Drake Corporation had the following amounts, all at retail:
Beginning inventory
$ 3,600
Purchases
$ 140,000
Purchase returns
6,000
Net markups
Abnormal shortage
4,000
Net markdowns
2,800
Sales returns
1,800
Normal shortage
2,600
Sales revenue
77,000
Employee discounts
1,600
18,000
What is Drakes ending inventory at retail?

o
o
o
o
$71,000
$72,600
$73,400
$69,400

Given the acquisition cost of product Dominoe is $29, the net realizable value for product
Dominoe is $26, the normal profit for product Dominoe is $3, and the market value (replacement
cost) for product Dominoe is $27, what is the proper per unit inventory price for product
Dominoe?
o
o
o
o
$29
$27
$23
$26
Page 5 of 6

Which of the following is not a common disclosure for inventories?
o Inventory costing methods employed
o Inventory composition
o Inventory financing arrangements
o Inventory location
Page 6 of 6

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Multiple Choice Question 72

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