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

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Question 1

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Henderson Company uses the gross profit method to estimate ending inventory and cost of goods sold when preparing monthly financial statements required by its bank. Inventory on hand at the end of July was $122,500. The following information for the month of August was available from company records: In addition, the controller is aware of $10,000 of inventory that was stolen during August from one of the company's warehouses. Required: 1. Calculate the estimated inventory at the end of August, assuming a gross profit ratio of 30%. 2. Calculate the estimated inventory at the end of August, assuming a markup on cost of 25%.

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1. 2. *Gross profit as a % o...

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Question 2

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If market price at year-end is less than contract price for outstanding purchase commitments, a loss is recorded for the difference. December 31, 2013

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Question 3

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To the nearest thousand, estimated ending inventory using the conventional retail method is:

For a purchase commitment contained within a single fiscal year, if the market price is less than the contract price, the purchase is recorded at the contract price.

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

To the nearest thousand, the estimated ending inventory at cost is:

Penfold's Paints uses the average cost retail method to estimate its ending inventories. The following data has been summarized for the year 2013: Required: Compute the cost-to-retail percentage used by Penfold's Paints.

Under the dollar-value LIFO retail method, to determine the value of a LIFO layer:

Masterlink Co., in applying the lower of cost or market method, reports its inventory at net realizable value. Which of the following statements is correct?

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

Charleston Company has elected to use the dollar-value LIFO retail method to value its inventory. The following data has been accumulated from the accounting records: Required: Estimate the ending inventory for December 31, 2013.

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

On August 31, 2013, 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.

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

Chicago Inc. applies lower-of-cost-or-market valuation to individual products and has collected the following data: Required: Determine the balance sheet inventory carrying value for Products A, B, and C.

Harlequin Co. has used the dollar-value LIFO retail method since it began operations in early 2012 (its base year) . Its beginning inventory for 2013 was $36,000 at cost and $72,000 at retail prices. At the end of 2013, it computed its estimated ending inventory at retail to be $120,000. Assuming its cost-to-retail percentage for 2013 transactions was 60%, what is the inventory balance that Harlequin Co. would report in its 12/31/13 balance sheet?

On July 5, 2013, a fire destroyed the entire inventory of Kinard Music Mart. The following information is available from its accounting records: Required: Compute the estimated cost of inventory lost in the fire.

Billingsly Products uses the conventional retail method to estimate its ending inventories. The following data has been summarized for the year 2013: Required: Estimate the ending inventory as of December 31, 2013.

Briefly explain the difference between the LIFO retail method and the dollar-value LIFO retail method.

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