Q1. You asked: "Montana Co. has determined its year-end inventory on a FIFO basis to be $600,000. Information pertaining to that inventory is as follows:
What should be the carrying value of Montana's inventory?
a. $600,000.
b. $520,000.
c. $590,000.
d. $510,000.
Q2. Under the conventional retail method, which of the following are not included in the denominator of the current period cost-to-retail conversion percentage?
a. Purchase returns
b. Net markups
c. Purchases
d. Net markdowns
Q3. Fad City sells novel clothes which are subject to a great deal of price volatility. A recent item which 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:
a. $14.
b. $26.
c. $29.
d. $35.
Q4. Lacy's Linen Mart uses the retail method to estimate inventories. Data for the first six months of 2011 include: beginning inventory at cost and retail were $60,000 and $120,000, net purchases at cost and retail were $312,000 and $480,000, and sales during the first six months totaled $490,000. The estimated inventory at June 30, 2011, would be:
a. $68,200.
b. $55,000.
c. $71,500.
d. $63,250.
Q5. 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:
a. Overstated by $31,000.
b. Overstated by $5,000.
c. Understated by $31,000.
d. Understated by $48,000.
Q6. Retrospective treatment of prior years' financial statements is required when there is a change from:
a. Average cost to FIFO.
b. FIFO to average cost.
c. LIFO to average cost.
d. All of the above.
Q7. To determine the value of a LIFO layer, using dollar-value LIFO retail:
a. Divide the LIFO layer by the layer-year price index and multiply by the layer-year cost-to-retail percentage.
b. Multiply the LIFO layer by the base year price index and the current year cost-to-retail percentage.
c. Multiply the LIFO layer by the layer-year price index and by the layer-year cost-to-retail percentage.
d. Divide the LIFO layer by the layer-year cost-to-retail percentage and multiply by the layer-year price index.
Q8. Hawkeye Auto Parts uses the retail method to estimate inventories. Data for the first six months of 2011 include: beginning inventory at cost and retail were $55,000 and $100,000, net purchases at cost and retail were $785,000 and $1,300,000, and sales during the first six months totaled $800,000. The estimated inventory at June 30, 2011, would be:
a. $330,000.
b. $360,000.
c. $362,300.
d. None of the above is correct.
Q9. In determining the cost-to-retail percentage for the current year:
a. Net markups are included.
b. Net markdowns are excluded.
c. Net sales are included.
d. All of the above are correct.
Q10. Under the LIFO retail method, which of the following are not included in the denominator of the cost-to-retail conversion percentage?
a. Freight-in
b. Purchase returns
c. Purchases
d. Net markdowns