# MC #9

### 41 terms by melissabecker

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### In applying LCM, market cannot be:

D. Greater than net realizable value.

### In applying LCM, market cannot be:

A. Less than net realizable value minus a normal profit margin.

### Masterlink Co., in applying the lower of cost or market method, reports its inventory at net realizable value. Which of the following statements are correct? Cost is Greater than NRV? NRV is Greater than replacement Cost?

C. Option C (Cost is Greater than NRV: Yes / NRV is Greater than replacement Cost: NO)

C. Consistency.

B. \$520,000.

### When using the gross profit method to estimate ending inventory, it is not necessary to know:

C. Cost of goods sold.

D. \$280,000

C. \$395,000.

C. \$250,000.

B. \$65,000.

### . When computing the cost-to-retail percentage for the conventional retail method, included in the denominator are:

C. Net markups, but not net markdowns.

### Included in the computation of the cost-to-retail percentage for the LIFO retail method are:

A. Net markups and net markdowns.

D. Freight-in.

### Under the retail inventory method:

A. A company measures inventory on its balance sheet by converting retail prices to cost

D. Net markdowns

A. Freight-in

### In determining the cost-to-retail percentage for the current year:

A. Net markups are included.

C. \$29.

A. \$68,200.

B. \$360,000.

### When computing the cost-to-retail percentage for the average cost retail method, included in the denominator are:

A. Net markups and net markdowns.

### The conventional retail inventory method is based on:

C. Average, lower of cost or market

C. \$275,000.

B. 66.7%.

D. \$30,000.

A. 54.9%.

C. \$127,000.

### Using the dollar-value LIFO retail method for inventory:

B. Combines retail LIFO accounting with dollar-value LIFO accounting

### To use the dollar-value LIFO retail method for inventory, the first step is to:

C. Determine the cost-to-retail percentage for the current year transactions.

### To use the dollar-value LIFO retail method for inventory, the second step is to determine the estimated:

D. Ending inventory at base year retail prices.

### To determine if an increase in the dollar value of inventory is due to increased quantities, using dollar-value LIFO retail:

D. Deflate the ending inventory amount to beginning of year prices and compare to the beginning inventory amount.

### To determine the value of a LIFO layer, using dollar-value LIFO retail:

C. Multiply the LIFO layer by the layer-year price index and by the layer-year cost-to-retail percentage.

### Harlequin Co. has used the dollar-value LIFO retail method since it began operations in early 2010 (its base year). Its beginning inventory for 2011 was \$36,000 at cost and \$72,000 at retail prices. At the end of 2011, it computed its estimated ending inventory at retail to be \$120,000. Assuming its cost-to-retail percentage for 2011 transactions was 60%, what is the inventory balance that Harlequin Co. would report in its 12/31/11 balance sheet?

D. It can't be determined with the given information.

### Retrospective treatment of prior years' financial statements is required when there is a change from:

D. All of the above. (A. Average cost to FIFO.
B. FIFO to average cost.
C. LIFO to average cost.)

### Prunedale Co. uses a periodic inventory system. Beginning inventory on January 1 was overstated by \$32,000, and its ending inventory on December 31 was understated by \$62,000. These errors were not discovered until the next year. As a result, Prunedale's cost of goods sold for this year was:

A. Overstated by \$94,000.

### Prunedale Co. uses a periodic inventory system. Beginning inventory on January 1 was understated by \$30,000, and its ending inventory on December 31 was understated by \$17,000. In addition, a purchase of merchandise costing \$20,000 was incorrectly recorded as a \$2,000 purchase. None of these errors were discovered until the next year. As a result, Prunedale's cost of goods sold for this year was:

C. Understated by \$31,000.

B. \$20,000.

C. \$180,000

B. \$440,000.

### Sullivan Corporation. has determined its year-end inventory on a FIFO basis to be \$500,000. Information pertaining to that inventory is as follows: Selling Price 520,000 Disposal Cost 30,000 Normal Prft Margin 60,000 Replacement cost 440,000 What should be the carrying value of Sullivan's inventory if the company prepares its financial statements according to International Financial Reporting Standards?

D. \$490,000. (Alway NRV as designated market, which is less than cost)

### When applying the lower-of-cost-or-market rule to inventory valuation according to International Financial Reporting Standards, market always is:

B. Net realizable value.

Example: