Bakersfield College - ACG 2021

1)During 2016, WW Inc. reduced its LIFO eligible inventory quantities due to a problem with its major supplier. The effect of this liquidation was to increase its cost of goods sold by approximately $50 million. WW has a 40% income tax rate. If WW had not experienced these supplier problems and the resulting liquidation:

1. 1. Its 2016 net income would have been $30 million lower because inventory purchase prices were rising.
   2. Its 2016 net income would have been $30 million lower because inventory purchase prices were declining.
   3. Its 2016 net income would have been $30 million higher because inventory purchase prices were rising.
   4. Its 2016 net income would have been $30 million higher because inventory purchase prices were declining.

Thompson TV and Appliance reported the following in its 2016 financial statements:

   2016

2. Thompson's 2016 gross profit ratio is: a.       25%.

b.     19%.

c.     20%.

d.     None of the above is correct.

3. Thompson's 2016 inventory turnover ratio is: a.       3.91.

b.     4.00.

c.     4.88.

d.     5.00.

4. Robertson Corporation’s inventory balance was $22,000 at the beginning of the year and $20,000 at the end. The inventory turnover ratio for the year was 6.0 and the gross profit ratio 40%. What were net sales for the year?

a. $126,000.

b. $200,000.

c. $120,000.

d. $210,000.

Use the following to answer questions:

Anthony Thomas Candies (ATC) reported the following financial data for 2016 and 2015:

5. ATC's gross profit ratio (rounded) in 2016 is: a. 53.4%.

b.     51.9%.

c.     50.3%.

d.     None of the above is correct.

6. ATC's inventory turnover ratio for 2016 is: a.     2.42.

b.     2.76.

c.     3.21.

d.     None of the above is correct.

7. The average days inventory for ATC (rounded) for 2016 is:
   1. Less than 100 days.
   2. 114 days
   3. 132 days.
   4. 151 days.

8. Dollar-value LIFO:
   1. Starts with ending inventory measured at current costs and re-creates LIFO layers for measuring inventory costs.
   2. Increases the recordkeeping costs of LIFO.
   3. Only is allowed for internal reporting purposes.
   4. None of the above is correct.

9. Compared to dollar-value LIFO, unit LIFO is:
   1. Less costly to implement.
   2. Less susceptible to LIFO liquidation.
   3. More costly to implement.
   4. More concerned with cost indexes.

10. Bond Company adopted the dollar-value LIFO inventory method on January 1, 2016. In applying the LIFO method, Bond uses internal cost indexes and the multiple-pools approach. The following data were available for Inventory Pool No. 3 for the two years following the adoption of LIFO:

Ending Inventory At Current                                       At Base

Year                Cost            Year Cost                 Cost Index

Under the dollar-value LIFO method, the inventory at December 31, 2017, should be a.         $357,600.

b.     $350,000.

c.      $351,600.

d.    None of these answer choices is correct.

Use the following to answer questions:

On January 1, 2016, Badger Inc. adopted the dollar-value LIFO method. The inventory cost on this date was $100,000. The 2016 ending inventory, valued at year-end costs, was $126,000. The relative cost index for this inventory in 2016 was 1.05.

11. What inventory balance should Badger report on its 12/31/16 balance sheet? a.         $126,000

b.     $121,000

c.     $120,000

d.     $100,000

12. Suppose that Badger's 2017 ending inventory, valued at year-end costs, was $143,000 and that the relative cost index for this inventory in 2017 was 1.10. In determining the inventory balance should Badger report in its 12/31/17 balance sheet:
    1. An additional layer of $23,000 is added to the 1/1/17 balance.
    2. An additional layer of $22,000 is added to the 1/1/17 balance.
    3. An additional layer of $11,000 is added to the 1/1/17 balance.
    4. None of the above is correct.

13. Suppose that Badger's 2018 ending inventory, valued at year-end costs, was $153,600 and that the relative cost index for this inventory in 2018 was 1.20. What inventory balance would Badger report on its 12/31/18 balance sheet?

a.     $128,000.

b.     $129,800.

c.     $153,600.

d.     None of these answer choices is correct.

14. Ramen Inc. adopted dollar-value LIFO (DVL) as of January 1, 2016, when it had a cost inventory of $600,000. Its inventory as of December 31, 2016, was $667,800 at year-end costs and the cost index was 1.06. What was DVL inventory on December 31, 2016?

a.     $630,000.

b.     $631,800.

c.     $636,000.