Bakersfield College - ACG 2021 1)The conventional retail inventory method is based on: Average cost

Bakersfield College - ACG 2021

1)The conventional retail inventory method is based on:

1. 1. Average cost.
   2. LIFO cost.
   3. Average, lower of cost and net realizable value.
   4. LIFO, lower of cost and net realizable value.

2. Cloverdale, Inc., uses the conventional retail inventory method to account for inventory. The  following information relates to current year’s operations:

What amount should be reported as cost of goods sold for the year? a.       $273,600.

b.    $272,861.

c.    $275,000.

d.    None of these answer choices are correct.

3. The conventional cost-to-retail percentage (rounded) is: a.       82.6%.

b.    66.7%.

c.    71.9%.

d.    75.5%.

4. To the nearest thousand, estimated ending inventory using the conventional retail method is: a.    $37,000.

b.    $32,000.

c.    $34,000.

d.    $30,000.

5. The conventional cost-to-retail percentage (rounded) is: a.       54.9%.

b.    58.9%.

c.    53.6%.

d.    70.6%.

6. To the nearest thousand, estimated ending inventory using the conventional retail method is: a.    $163,000.

b.    $124,000.

c.    $127,000.

d.    $136,000.

7. Using the dollar-value LIFO retail method for inventory:
   1. Is the same as dollar-value LIFO, except that the inventory is measured at retail, rather than at cost.
   2. Combines retail LIFO accounting with dollar-value LIFO accounting.
   3. Allows companies to report inventory on the balance sheet at retail prices.
   4. All of these answer choices are correct.

8. The first step, when using dollar-value LIFO retail method for inventory, is to:
   1. Determine the estimated ending inventory at current year retail prices.
   2. Determine the estimated cost of goods sold for the current year.
   3. Determine the cost-to-retail percentage for the current year transactions.
   4. Price index adjust the LIFO inventory layers.

9. The second step, when using dollar-value LIFO retail method for inventory, is to determine the estimated:
   1. Ending inventory at current year retail prices.
   2. Cost of goods sold for the current year.
   3. Ending inventory at cost.
   4. Ending inventory at base year retail prices.

10. Under the dollar-value LIFO retail method, to determine if the increase in the value of inventory was due to an increase in quantities:
    1. Compare beginning and ending inventory amounts at current year prices.
    2. Compare beginning and ending inventory amounts after adjusting both amounts to the average price level for the year.
    3. Inflate beginning inventory amount to end of year prices and compare to ending inventory amount.
    4. Deflate the ending inventory amount to beginning of year prices and compare to the beginning inventory amount.

11. Under the dollar-value LIFO retail method, to determine the value of a LIFO layer:
    1. Divide the LIFO layer by the layer-year price index and multiply by the layer-year cost-to- retail percentage.
    2. Multiply the LIFO layer by the base year price index and the current year cost-to-retail percentage.
    3. Multiply the LIFO layer by the layer-year price index and by the layer-year cost-to-retail percentage.
    4. Divide the LIFO layer by the layer-year cost-to-retail percentage and multiply by the layer- year price index.

12. 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:

Cost        Retail Beginning inventory                       $    55       $    90

What is the value of Portman’s inventory at 12/31/16?

1. 1. $150 million.
   2. $252 million.
   3. $300 million.
   4. None of these answer choices are correct.

13. Harlequin Co. has used the dollar-value LIFO retail method since it began operations in early 2015 (its base year). Its beginning inventory for 2016 was $36,000 at cost and $72,000 at retail prices. At the end of 2016, it computed its estimated ending inventory at retail to be $120,000. Assuming its cost-to- retail percentage for 2016 transactions was 60%, what is the inventory balance that Harlequin Co. would report in its 12/31/16 balance sheet?

a.    $64,800.

b.    $72,000.

c.    $120,000.

d.    The balance can’t be determined with the given information.

14. Retrospective treatment of prior years' financial statements is required when there is a change from:
    1. Average cost to FIFO.
    2. FIFO to average cost.
    3. LIFO to average cost.
    4. All of these answer choices are correct.

15. 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:
    1. Overstated by $94,000.
    2. Overstated by $30,000.
    3. Understated by $94,000.
    4. Understated by $30,000.

16. Poppy 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