ACCT 3304, Fall 2012
Chapter 9 Assignment
Name______________________________________
Due in class on October 29 (5 pts)
Keep a copy of your answers, as we will discuss in class.
I.
Multiple choice questions
The following information is for the next two questions:
On January 1, 2012, the merchandise inventory of M Company was $300,000.
From January through June 2012, M Company purchased $1,900,000 of
merchandise and recorded sales of $2,000,000.
____ 1.
If the gross profit (gross margin) on these sales was 20%, what
is the estimated merchandise inventory of M Company at 6/30/12?
A.
$ 200,000
B.
$ 400,000
C.
$ 600,000
D.
$1,600,000
____ 2.
If the gross profit (gross margin) is estimated as 20% of cost,
what is the estimated merchandise inventory of M Company at June
30, 2012?
A.
$ 400,000
B
$ 533,333
C.
$ 600,000
D.
$1,600,000
E.
$1,800,000
____ 3.
An inventory estimation method which is designed to approximate
inventory valuation at the lower of cost or market is
A.
last-in, first-out
B.
first-in, first-out
C.
conventional retail method
D.
specific identification
____ 4.
When calculating the cost to retail ratio for the retail
inventory method,
A.
if it is the conventional method, the beginning inventory
is included with purchases and markdowns are included in
the calculation.
B.
if it is the LIFO method, the beginning inventory is
separate from purchases and markdowns are excluded from
the calculation.
C.
if it is the LIFO method, the beginning inventory is
included with purchases and markdowns are not included in
the ratio calculation.
D.
if it is the conventional method, the beginning inventory
is separate from purchases and markdowns are not included
in the calculation.
1
II.
Retail estimating techniques
The following information was available from the records of
Johnson's Department Store for the year ended December 31, 2012.
At Cost
At Retail
Merchandise Inventory, 1/1/12
$ 90,000
$130,000
Purchases
330,000
460,000
Markups (net)
10,000
Markdowns (net)
40,000
Sales
380,000
Ending inventory at retail?
$________
CARRY ALL RATIOS TO 4 DECIMAL PLACES. You do NOT have to
reconstruct the full schedule as we did in class, but you should
show the numerator and denominator calculation(s) of the cost-toretail ratio(s) for partial credit.
A.
B.
C.
Estimate ending inventory using
the average retail method:
$_________________
Given the cost information in the top section of this page,
and the calculated ending inventory from Part A, prepare the
adjusting journal entry for the periodic method to recognize
ending inventory and cost of goods sold:
Estimate ending inventory using
the conventional retail method:
2
$_________________
D.
E.
Estimate ending inventory using
the LIFO retail method:
Estimate ending inventory using
the dollar value LIFO retail method:
(assume the price index at 1/1/12
was 100 and at 12/31/12 it was 104)
3
$_________________
$_________________