Accounting 350, Summer 2009
Quiz #4, Chpts. 8 & 9
1.
Name
Bell Inc. took a physical inventory at the end of the year and determined that $650,000 of
goods were on hand. In addition, Bell, Inc. determined that $50,000 of goods that were
in transit that were shipped f.o.b. shipping were actually received two days after the
inventory count and that the company had $75,000 of goods out on consignment. What
amount should Bell report as inventory at the end of the year?
a. $650,000.
b. $700,000.
c. $725,000.
d. $775,000.
Use the following information for question 2.
Hudson, Inc. is a calendar-year corporation. Its financial statements for the years 2011 and
2010 contained errors as follows:
2011
2010
Ending inventory
$3,000 overstated
$8,000 overstated
Depreciation expense
$2,000 understated
$6,000 overstated
2.
Assume that no correcting entries were made at December 31, 2010. Ignoring income
taxes, by how much will retained earnings at December 31, 2011 be overstated or
understated?
a. $1,000 understated
b. $5,000 overstated
c. $5,000 understated
d. $9,000 understated
Use the following information for questions 3 and 4.
Niles Co. has the following data related to an item of inventory:
Inventory, March 1
100 units @ $4.20
Purchase, March 7
350 units @ $4.40
Purchase, March 16
70 units @ $4.50
Inventory, March 31
130 units
3.
The value assigned to ending inventory if Niles uses LIFO is
a. $579.
b. $552.
c. $546.
d. $585.
4.
The value assigned to cost of goods sold if Niles uses FIFO is
a. $579.
b. $552.
c. $1,723.
d. $1,696.
Use the following information for questions 5 through 6.
Gross Corporation adopted the dollar-value LIFO method of inventory valuation on December
31, 2009. Its inventory at that date was $220,000 and the relevant price index was 100.
Information regarding inventory for subsequent years is as follows:
Date
December 31, 2010
December 31, 2011
December 31, 2012
Inventory at
Current Prices
$256,800
290,000
325,000
Current
Price Index
107
125
130
5.
What is the cost of the ending inventory at December 31, 2011 under dollar-value LIFO?
a. $232,000.
b. $231,400.
c. $232,840.
d. $240,000.
6.
What is the cost of the ending inventory at December 31, 2012 under dollar-value LIFO?
a. $256,240.
b. $254,800.
c. $250,000.
d. $263,400.
7.
Muckenthaler Company sells product 2005WSC for $20 per unit. The cost of one unit of
2005WSC is $18, and the replacement cost is $17. The estimated cost to dispose of a
unit is $4, and the normal profit is 40%. At what amount per unit should product
2005WSC be reported, applying lower-of-cost-or-market?
a. $8.
b. $16.
c. $17.
d. $18.
8.
Kesler, Inc. estimates the cost of its physical inventory at March 31 for use in an interim
financial statement. The rate of markup on cost is 25%. The following account balances
are available:
Inventory, March 1
Purchases
Purchase returns
Sales during March
$220,000
172,000
8,000
300,000
The estimate of the cost of inventory at March 31 would be
a. $84,000.
b. $144,000.
c. $159,000.
d. $112,000.
9.
On January 1, 2010, the merchandise inventory of Glaus, Inc. was $800,000. During
2010 Glaus purchased $1,600,000 of merchandise and recorded sales of $2,000,000.
The gross profit rate on these sales was 25%. What is the merchandise inventory of
Glaus at December 31, 2010?
a. $400,000.
b. $500,000.
c. $900,000.
d. $1,500,000.
10.
11.
12.
The inventory account of Irick Company at December 31, 2010, included the following
items:
Inventory Amount
Merchandise out on consignment at sales price
(including markup of 40% on selling price)
$15,000
Goods purchased, in transit (shipped f.o.b. shipping point)
12,000
Goods held on consignment by Irick
13,000
Goods out on approval (sales price $7,600, cost $6,400)
7,600
Based on the above information, the inventory account at December 31, 2010, should be
reduced by
a. $20,200.
b. $22,600.
c. $32,200.
d. $32,000.
Dicer uses the conventional retail method to determine its ending inventory at cost.
Assume the beginning inventory at cost (retail) were $130,000 ($198,000), purchases
during the current year at cost (retail) were $685,000 ($1,100,000), freight-in on these
purchases totaled $43,000, sales during the current year totaled $1,050,000, and net
markups (markdowns) were $24,000 ($36,000). What is the ending inventory value at
cost?
a. $153,164.
b. $156,165.
c. $157,412.
d. $236,000.
East Corporation’s computation of cost of goods sold is:
Beginning inventory
Add: Cost of goods purchased
Cost of goods available for sale
Ending inventory
Cost of goods sold
$ 60,000
405,000
465,000
80,000
$385,000
The average days to sell inventory for East are
a. 56.9 days.
b. 63.1 days.
c. 66.4 days.
d. 75.8 days.
Use the following information for question 13.
Plank Co. uses the retail inventory method. The following information is available for the current
year.
Cost
Retail
Beginning inventory
$ 78,000
$122,000
Purchases
295,000
415,000
Freight-in
5,000
—
Employee discounts
—
2,000
Net markups
—
15,000
Net Markdowns
—
20,000
Sales
—
390,000
13.
The ending inventory at retail should be
a. $160,000.
b. $150,000.
c. $144,000.
d. $140,000.
No.
1.
Answer
Derivation
d
$650,000 + $50,000 + $75,000 = $775,000.
2.
a
$6,000 – ($3,000 + $2,000) = $1,000.
3.
b
(100 × $4.20) + (30 × $4.40) = $552.
4.
d
100 + 350 + 70 – 130 = 390 units
(100 × $4.20) + (290 × $4.40) = $1,696.
5.
c
6.
a
$290,000 ÷ 1.25 = $232,000
($220,000 × 1) + ($12,000 × 1.07) = $232,840.
$325,000 ÷ 1.30 = $250,000
($220,000 × 1) + ($12,000 × 1.07) + ($18,000 × 1.3) = $256,240.
7.
b
8.
b
9.
c
NRV = $20 – $4 = $16, RC = $17
NRV – PM = $16 – ($20 × .40) = $8, cost = $18.
COGS = $300,000 ÷ 1.25 = $240,000
($220,000 + $172,000 – $8,000) – $240,000 = $144,000.
COGS = $2,000,000 × .75 = $1,500,000
$800,000 + $1,600,000 – $1,500,000 = $900,000.
($15,000 × 40%) + $13,000 + ($7,600 – $6,400) = $20,200.
10.
a
11.
a
$198,000 + $1,100,000 + $24,000 – $1,050,000 – $36,000 = $236,000;
($130,000 + $685,000 + $43,000) ÷ ($198,000 + $1,100,000 + $24,000) =
.649; $236,000 × .649 = $153,164.
12.
c
$385,000 ÷ [($60,000 + $80,000) ÷ 2] = 5.5; 365 ÷ 5.5 = 66.4.
13.
d
$122,000 + $415,000 – $2,000 + $15,000 – $20,000 – $390,000 = $140,000.