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Exam 9: Inventories: Additional Issues

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Question 31

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In applying the lower of cost and net realizable value rule,the inventory of rehab equipment would be valued at:

A) $315.
B) $340.
C) $225.
D) $250.

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

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Question 32

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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 33

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Losses on reduction to NRV may be charged to either cost of goods sold or to a line item among operating expenses.

Use the following to answer questions Novelli's Nursery has developed the following data for lower of cost and net realizable valuation for its products: The costs to sell are 10% of selling price. -Required: Determine the reported inventory value assuming the lower of cost and net realizable value rule is applied to individual trees.

An argument against use of the lower of cost and net realizable value rule is its lack of:

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:

Estimated ending inventory at cost is:

Cornhusker Can Co.uses the conventional retail method to estimate ending inventories.The following data has been summarized for year ended December 31,2016: Required: Estimate the cost of ending inventory applying the conventional retail method.Assume that sales are recorded net of employee discounts.

Under the LIFO retail method,the denominator in the cost-to-retail percentage includes:

Howard's Supply Co.suffered a fire loss on April 20,2016.The company's last physical inventory was taken January 30,2016,at which time the inventory totaled $220,000.Sales from January 30 to April 20 were $600,000 and purchases during that time were $450,000.Howard's consistently reports a 30% gross profit.The estimated inventory loss is:

Portman Inc.uses the conventional retail inventory method.Expressed in millions of dollars,information about Portman's 2016 inventory account is expressed in the table below: What is the value of Portman's inventory at 12/31/16?

Orlando Company has used the average cost method for inventory valuation since it began business in 2012,but has elected to change to the FIFO method starting in 2015.Year-end inventory valuations under each method are shown below: Required: How would Orlando reflect the change in accounting principle in its financial statements (ignore income taxes)?

In the following questions, inventory errors are noted for 2016. Assume that the errors are not discovered until 2017, 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 -

To the nearest thousand,estimated ending inventory is:

In applying the lower of cost and net realizable value rule,the inventory of rehab supplies would be valued at:

To the nearest thousand,estimated ending inventory is:

Fad City sells novel clothes that are subject to a great deal of price volatility.A recent item that cost $20 was marked up $12,marked down for a sale by $6 and then had a markdown cancellation of $3.The latest selling price is:

In applying the lower of cost and net realizable value rule,the inventory of surgical equipment would be valued at:

Use the following to answer questions Weldon Animal Feeds has developed the following data for lower of cost and net realizable valuation for its products (in thousands): The costs to sell are 20% of selling price. -Required: Determine the reported inventory value assuming the lower of cost and net realizable value rule is applied to individual types of feeds.

A change from LIFO to any other inventory method is accounted for retrospectively.