43) Data related to the inventories of Mountain Ski Equipment and Supplies is presented below:
Skis
Boots
Apparel
Supplies
Selling price
$
$
150,000
$
120,000
$
60,000
Cost
133,000
90,000
48,000
Replacement
cost
130,000
110,000
50,000
Sales
commission
%
10
%
10
%
10
%
Normal gross
profit ratio
%
20
%
15
%
15
%
In applying the lower of cost or market rule, the inventory of supplies would be valued at:
A) $45,000.
B) $54,000.
C) $50,000.
D) $48,000.
44) When using the gross profit method to estimate ending inventory, it is not necessary to know:
A) Beginning inventory.
B) Net purchases.
C) Cost of goods sold.
D) Net sales.
45) On July 8, a fire destroyed the entire merchandise inventory on hand of Larrenaga Wholesale
Corporation. The following information is available:
Sales, January 1 through July 8
$
700,000
Inventory, January 1
130,000
Purchases, January 1 through July 8
640,000
Gross profit ratio
30
%
What is the estimated inventory on July 8 immediately prior to the fire?
A) $192,000.
B) $490,000.
C) $510,000.
D) $280,000.
46) California Inc., through no fault of its own, lost an entire plant due to an earthquake on May 1,
2018. In preparing its insurance claim on the inventory loss, the company developed the following
data: Inventory January 1, 2018, $300,000; sales and purchases from January 1, 2018, to May 1,
2018, $1,300,000 and $875,000, respectively. California consistently reports a 40% gross profit.
The estimated inventory on May 1, 2018, is:
A) $302,500.
B) $360,000.
C) $395,000.
D) $455,000.
47) Howard’s Supply Co. suffered a fire loss on April 20, 2018. The company’s last physical
inventory was taken January 30, 2018, at which time the inventory totaled $220,000. Sales from
January 30 to April 20 were $600,000 and purchases during that time were $450,000. Howard’s
consistently reports a 30% gross profit. The estimated inventory loss is:
A) $490,000.
B) $238,000.
C) $250,000.
D) None of these answer choices are correct.
48) Coastal Shores Inc. (CSI) was destroyed by Hurricane Fred on August 5, 2018. At January 1,
CSI reported an inventory of $170,000. Sales from January 1, 2018, to August 5, 2018, totaled
$480,000 and purchases totaled $195,000 during that time. CSI consistently marks up its products
60% over cost to arrive at a selling price. The estimated inventory loss due to Hurricane Fred
would be:
A) $131,175.
B) $65,000.
C) $69,000.
D) None of these answer choices are correct.
49) Under the conventional retail method, the denominator in the cost-to-retail percentage
includes:
A) Net markups and net markdowns.
B) Neither net markups nor net markdowns.
C) Net markups, but not net markdowns.
D) Net markdowns, but not net markups.
50) Under the LIFO retail method, the denominator in the cost-to-retail percentage includes:
A) Net markups and net markdowns.
B) Neither net markups nor net markdowns.
C) Net markups, but not net markdowns.
D) Net markdowns, but not net markups.
51) Under the retail method, the denominator in the cost-to-retail percentage does not include:
A) Purchases.
B) Purchase returns.
C) Abnormal shortages.
D) Freight-in.
52) Under the retail inventory method:
A) A company measures inventory on its balance sheet by converting retail prices to cost.
B) A company measures inventory on its balance sheet at current selling prices.
C) A company measures inventory on its balance sheet on a LIFO basis.
D) None of these answer choices are correct.
53) Under the conventional retail method, which of the following are not included in the
denominator of the current period cost-to-retail conversion percentage?
A) Purchase returns.
B) Net markups.
C) Purchases.
D) Net markdowns.
54) Under the LIFO retail method, which of the following are not included in the denominator of
the cost-to-retail conversion percentage?
A) Freight-in.
B) Purchase returns.
C) Purchases.
D) Net markdowns.
55) Under the retail method, in determining the cost-to-retail percentage for the current year:
A) Net markups are included.
B) Net markdowns are excluded.
C) Net sales are included.
D) All of these answer choices are correct.
56) Fad City sells novel clothes that are subject to a great deal of price volatility. A recent item that
cost $20 was marked up $12, marked down for a sale by $6 and then had a markdown cancellation
of $3. The latest selling price is:
A) $23.
B) $26.
C) $29.
D) $35.
57) 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:
Cost
Retail
Beginning inventory
$
15,000
$
23,000
Purchases
49,000
78,000
Freight-in
2,500
Purchase returns
1,700
2,600
Net markups
2,000
Net markdowns
4,100
Net sales
70,600
Employee discounts
700
The numerator for the current period’s cost-to-retail percentage is:
A) $64,800.
B) $48,100.
C) $47,700.
D) $49,800.
58) 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:
Cost
Retail
Beginning inventory
$
15,000
$
23,000
Purchases
49,000
78,000
Freight-in
2,500
Purchase returns
1,700
2,600
Net markups
2,000
Net markdowns
4,100
Net sales
70,600
Employee discounts
700
The denominator for the current period’s cost-to-retail percentage is:
A) $96,300.
B) $73,300.
C) $101,000.
D) $81,500.
59) 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:
Cost
Retail
Beginning inventory
$
15,000
$
23,000
Purchases
49,000
78,000
Freight-in
2,500
Purchase returns
1,700
2,600
Net markups
2,000
Net markdowns
4,100
Net sales
70,600
Employee discounts
700
The estimated ending inventory at retail is:
A) $27,300.
B) $25,000.
C) $26,600.
D) $26,400.
60) 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:
Cost
Retail
Beginning inventory
$
15,000
$
23,000
Purchases
49,000
78,000
Freight-in
2,500
Purchase returns
1,700
2,600
Net markups
2,000
Net markdowns
4,100
Net sales
70,600
Employee discounts
700
To the nearest thousand, the estimated ending inventory at cost is (round cost-to-retail ratio to
whole percentage):
A) $16,000.
B) $15,000.
C) $13,000.
D) $19,000.
61) Lacy’s Linen Mart uses the average cost retail method to estimate inventories. Data for the first
six months of 2018 include: beginning inventory at cost and retail were $60,000 and $120,000, net
purchases at cost and retail were $312,000 and $480,000, and sales during the first six months
totaled $490,000. The estimated inventory at June 30, 2018, would be:
A) $68,200.
B) $55,000.
C) $71,500.
D) $63,250.
62) Hawkeye Auto Parts uses the average cost retail method to estimate inventories. Data for the
first six months of 2018 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, 2018, would be:
A) $330,000.
B) $360,000.
C) $362,300.
D) None of these answer choices are correct.
63) Marilee’s Electronics uses a periodic inventory system and the average cost retail method to
estimate ending inventory and cost of goods sold. The following data is available from the
company records for the month of June 2018:
Cost
Retail
Beginning inventory
$
80,000
$
Net purchases
261,000
Net markups
Net markdowns
Net sales
The average cost-to-retail percentage is:
A) 52.2%.
B) 61.5%.
C) 56.8%.
D) 55%.
64) Marilee’s Electronics uses a periodic inventory system and the average cost retail method to
estimate ending inventory and cost of goods sold. The following data is available from the
company records for the month of June 2018:
Cost
Retail
Beginning inventory
$
80,000
$
Net purchases
261,000
Net markups
Net markdowns
Net sales
To the nearest thousand, estimated ending inventory is:
A) $55,000.
B) $52,000.
C) $57,000.
D) None of these answer choices are correct.
65) Benny’s Bed Co. uses a periodic inventory system and the average cost retail method to
estimate ending inventory and cost of goods sold. The following data is available from the
company records for the month of September 2018.
Cost
Retail
Beginning inventory
$
30,000
$
Net purchases
125,000
Net markups
Net markdowns
Net sales
The average cost-to-retail percentage (rounded) is:
A) 74.5%.
B) 55.6%.
C) 57.4%.
D) 58.7%.
66) Benny’s Bed Co. uses a periodic inventory system and the average cost retail method to
estimate ending inventory and cost of goods sold. The following data is available from the
company records for the month of September 2018.
Cost
Retail
Beginning inventory
$
30,000
$
Net purchases
125,000
Net markups
Net markdowns
Net sales
To the nearest thousand, estimated ending inventory is:
A) $41,000.
B) $37,000.
C) $51,000.
D) None of these answer choices are correct.
67) 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.
Cost
Retail
Beginning inventory
$
66,000
$
Net purchases
280,000
Net markups
Net markdowns
Net sales
Current period cost-to-retail percentage is:
A) 70.0%.
B) 68.7%.
C) 63.6%.
D) 63.5%.
68) 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.
Cost
Retail
Beginning inventory
$
66,000
$
Net purchases
280,000
Net markups
Net markdowns
Net sales
Estimated ending inventory at retail is:
A) $65,000.
B) $169,600.
C) $25,000.
D) $129,000.
69) 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.
Cost
Retail
Beginning inventory
$
66,000
$
Net purchases
280,000
Net markups
Net markdowns
Net sales
Estimated ending inventory at cost is:
A) $90,720.
B) $83,500.
C) $91,600.
D) None of these answer choices are correct.