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Exam 9: Inventories: Additional Issues

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Question 81

True/False

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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.

A) True
B) False

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Question 82

Multiple Choice

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Portman Inc. uses the conventional retail inventory method. Expressed in millions of dollars, information about Portman's 2018 inventory account is expressed in the table below: What is the value of Portman's inventory at 12/31/2018?

A) $150 million.
B) $252 million.
C) $300 million.
D) None of these answer choices are correct.

E) C) and D)
F) All of the above

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Question 83

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Murdock Industries uses a periodic inventory system and the LIFO retail method to estimate its ending inventories. The following data has been summarized for December 31, 2018: Required: Estimate the LIFO cost of ending inventory. Assume stable retail prices during the period.

In the following questions, inventory errors are noted for 2018. Assume that the errors are not discovered until 2019, and that the company uses a periodic inventory system. Indicate the effect of the error, if any, on the accounts noted in the columns, using the following code: U = Understated; O = Overstated; NE = No effect - $\begin{array} { | l | l | l | } \hline { \text { Error } } & \text { Cost of goods sold } & \text { Retained earnings } \\\hline \text { Understated beginning inventory } & & \\\hline\end{array}$

Penfold's Paints uses the average cost retail method to estimate its ending inventories. The following data has been summarized for the year 2018: Required: Compute the cost-to-retail percentage used by Penfold's Paints.

Under International Financial Reporting Standards (IFRS) , inventory is valued at the lower of cost and:

Willie Nelson's Boots uses the conventional retail method to estimate ending inventory. Cost data for the most recent quarter is shown below: - The conventional cost-to-retail percentage (rounded) is:

Under the retail method, the denominator in the cost-to-retail percentage does not include:

Data related to the inventories of Costco Medical Supply are presented below: $\begin{array} { l c c c r } & \text { Surgical } & \text { Surgical } & \text { Rehab } & \text { Rehab } \\& \text { Equiprnent } & \text { Supplies } & \text { Equipment } & \text { Supplies } \\\text { Selling price } & \$ 260 & \$ 100 & \$ 340 & \$ 165 \\\text { Cost } & 170 & 90 & 250 & 162 \\\text { Costs to sell } & 30 & 15 & 25 & 10\end{array}$ - In applying the lower of cost or net realizable value rule, the inventory of rehab supplies would be valued at:

On July 8, a fire destroyed the entire merchandise inventory on hand of Larrenaga Wholesale Corporation. The following information is available: What is the estimated inventory on July 8 immediately prior to the fire?

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. - Current period cost-to-retail percentage is:

Data related to the inventories of Mountain Ski Equipment and Supplies is presented below: - In applying the lower of cost or market rule, the inventory of apparel would be valued at:

Lower of cost or net realizable value can be applied to individual inventory items, to logical categories of inventory, or to the entire inventory.