Intermediate Accounting
Intermediate Accounting
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Fulbright Corp. uses the periodic inventory system. During its first year of operations, Fulbright made the following purchases (listed in chronological order of acquisition):
• 43 units at $97
• 74 units at $71
• 175 units at $61
Sales for the year totaled 268 units, leaving 24 units on hand at the end of the year.
Ending inventory using the average cost method is (Do not round unit cost calculation. Round your final answer to the nearest whole dollar amount):
$1,652.
$2,328.
$1,464.
$1,514.
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Nu Company reported the following pretax data for its first year of operations.
| Net sales | 2,810 |
| Cost of goods available for sale | 2,310 |
| Operating expenses | 780 |
| Effective tax rate | 30% |
| Ending inventories: | |
| If LIFO is elected | 970 |
| If FIFO is elected | 1,130 |
What is Nu’s net income if it elects LIFO?
$690.
$850.
$595.
$483.
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| Nueva Company reported the following pretax data for its first year of operations. |
| Net sales | 7,400 |
| Cost of goods available for sale | 5,650 |
| Operating expenses | 1,578 |
| Effective tax rate | 40% |
| Ending inventories: | |
| If LIFO is elected | 634 |
| If FIFO is elected | 809 |
| What is Nueva’s net income if it elects FIFO? (Round your intermediate and final answer to the nearest whole dollar amount.) |
$806.
$484.
$981.
$589.
| Thompson TV and Appliance reported the following in its 2016 financial statements: |
| 2016 | |
| Sales | $437,000 |
| Cost of goods sold: | |
| Inventory, January 1 | 73,000 |
| Net purchases | 333,000 |
| Goods available for sale | 406,000 |
| Inventory, December 31 | 87,000 |
| Cost of goods sold | 319,000 |
| Gross profit | $118,000 |
| Thompson’s 2016 gross profit ratio is (Round your answer to the nearest whole percentage): |
24%.
26%.
27%.
None of these is correct.
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| Anthony Thomas Candies (ATC) reported the following financial data for 2016 and 2015: |
| 2016 | 2015 | |
| Sales | $315,000 | $295,000 |
| Sales returns and allowances | 7,500 | 5,500 |
| Net sales | $307,500 | $289,500 |
| Cost of goods sold: | ||
| Inventory, January 1 | 47,000 | 31,000 |
| Net purchases | 138,000 | 129,000 |
| Goods available for sale | 185,000 | 160,000 |
| Inventory, December 31 | 60,000 | 47,000 |
| Cost of goods sold | 125,000 | 113,000 |
| Gross profit | $182,500 | $176,500 |
| ATC’s gross profit ratio in 2016 is (Round your answer to one decimal place e.g., .123 as 12.3%): |
59.3%.
60.1%.
56.2%.
None of these is correct.
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| Anthony Thomas Candies (ATC) reported the following financial data for 2016 and 2015: |
| 2016 | 2015 | |
| Sales | $306,000 | $288,000 |
| Sales returns and allowances | 8,100 | 5,000 |
| Net sales | $297,900 | $283,000 |
| Cost of goods sold: | ||
| Inventory, January 1 | 62,000 | 18,000 |
| Net purchases | 139,000 | 142,000 |
| Goods available for sale | 201,000 | 160,000 |
| Inventory, December 31 | 62,000 | 62,000 |
| Cost of goods sold | 139,000 | 98,000 |
| Gross profit | $158,900 | $185,000 |
| The average days inventory for ATC for 2016 is (Round intermediate calculations to two decimal places. Round your final answer to a whole number): |
rev: 11_19_2015_QC_CS-33523
223 days.
163 days.
Less than 100 days.
213 days.
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| On January 1, 2016, Badger Inc. adopted the dollar-value LIFO method. The inventory cost on this date was $115,000. The 2016 ending inventory, valued at year-end costs, was $150,800. The relative cost index for this inventory in 2016 was 1.16. Assume that Badger’s 2017 ending inventory, valued at year-end costs, was $164,700 and that the relative cost index for this inventory in 2016 was 1.22. |
| Suppose that Badger’s 2018 ending inventory, valued at year-end costs, was $167,500 and that the relative cost index for this inventory in 2018 was 1.25. What inventory balance would Badger report on its 12/31/18 balance sheet? |
$134,000
$137,280
$167,500
None of these answer choices is correct.
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| Linguini Inc. adopted dollar-value LIFO (DVL) as of January 1, 2016, when it had an inventory of $864,000. Its inventory as of December 31, 2016, was $897,000 at year-end costs and the cost index was 1.15. What was DVL inventory on December 31, 2016? |
780,000
864,000
897,000
993,600
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|
Data related to the inventories of Costco Medical Supply are presented below: |
| Surgical Equipment |
Surgical Supplies |
Rehab Equipment |
Rehab Supplies |
|
| Selling price | $268 | $134 | $351 | $158 |
| Cost | 153 | 131 | 251 | 155 |
| Costs to sell | 26 | 17 | 23 | 10 |
| In applying the lower of cost and net realizable value rule, the inventory of surgical supplies would be valued at: |
$99.
$131.
$77.
$117.
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| Data related to the inventories of Costco Medical Supply are presented below: |
| Surgical Equipment |
Surgical Supplies |
Rehab Equipment |
Rehab Supplies |
|
| Selling price | $264 | $134 | $324 | $150 |
| Cost | 165 | 106 | 288 | 148 |
| Costs to sell | 15 | 9 | 28 | 9 |
| In applying the lower of cost and net realizable value rule, the inventory of rehab equipment would be valued at: |
$267.
$296.
$288.
$215.
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|
Data related to the inventories of Costco Medical Supply are presented below: |
| Surgical Equipment |
Surgical Supplies |
Rehab Equipment |
Rehab Supplies |
|
| Selling price | $266 | $123 | $357 | $161 |
| Cost | 164 | 100 | 251 | 162 |
| Costs to sell | 24 | 13 | 25 | 6 |
| In applying the lower of cost and net realizable value rule, the inventory of rehab supplies would be valued at: |
$162.
$107.
$158.
$155.
| Data related to the inventories of Alpine Ski Equipment and Supplies is presented below: |
| Skis | Boots | Apparel | Supplies | |
| Selling price | $165,000 | $142,000 | $119,000 | $77,000 |
| Cost | 139,000 | 140,000 | 83,300 | 50,050 |
| Replacement cost | 111,000 | 115,000 | 103,300 | 46,050 |
| Sales commission | 10% | 10% | 10% | 10% |
| In applying the lower of cost and net realizable value rule, the inventory of boots would be valued at: |
$127,800.
$92,300.
$115,000.
$140,000.
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| On July 8, a fire destroyed the entire merchandise inventory on hand of Larrenaga Wholesale Corporation. The following information is available: |
| Sales, January 1 through July 8 | $694,000 |
| Inventory, January 1 | 136,000 |
| Purchases, January 1 through July 8 | 644,000 |
| Gross profit ratio | 25% |
| What is the estimated inventory on July 8 immediately prior to the fire? |
$161,000.
$260,100.
$520,500.
$259,500.
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| Fad City sells novel clothes that are subject to a great deal of price volatility. A recent item that cost $20.80 was marked up $13.00, marked down for a sale by $5.40 and then had a markdown cancellation of $3.30. The latest selling price is: |
$35.70.
$26.20.
$31.70.
$37.10.
|
Data below for the year ended December 31, 2016, relates to Houdini Inc. Houdini started business January 1, 2016, and uses the LIFO retail method to estimate ending inventory. |
| Cost | Retail | |
| Beginning inventory | $76,000 | $115,000 |
| Net purchases | 362,610 | 530,000 |
| Net markups | 31,000 | |
| Net markdown | 51,000 | |
| Net sales | 474,000 |
Estimated ending inventory at cost is (Do not round intermediate calculations):
$101,596.
$106,486.
$110,770.
None of these answer choices are correct.
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|
Willie Nelson’s Boots uses the conventional retail method to estimate ending inventory. Cost data for the most recent quarter is shown below: |
| Cost | Retail | |
| Beginning inventory | $48,000 | $65,000 |
| Net purchases | 156,000 | 219,000 |
| Net markups | 20,000 | |
| Net markdowns | 37,000 | |
| Net sales | 222,000 |
| The conventional cost-to-retail percentage (rounded) is: |
76.4%.
67.1%.
84.3%.
71.8%.
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|
Willie Nelson’s Boots uses the conventional retail method to estimate ending inventory. Cost data for the most recent quarter is shown below: |
| Cost | Retail | |
| Beginning inventory | $32,000 | $69,000 |
| Net purchases | 151,000 | 201,000 |
| Net markups | 30,000 | |
| Net markdowns | 35,000 | |
| Net sales | 220,000 |
| To the nearest thousand, estimated ending inventory using the conventional retail method is (Do not round intermediate calculations): |
$40,000.
$28,000.
$27,000.
$12,000.
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| Poppy Co. uses a periodic inventory system. Beginning inventory on January 1 was understated by $31,000, and its ending inventory on December 31 was understated by $17,000. In addition, a purchase of merchandise costing $21,700 was incorrectly recorded as a $2,170 purchase. None of these errors were discovered until the next year. As a result, Poppy’s cost of goods sold for this year was: |
Overstated by $33,530.
Overstated by $5,530.
Understated by $50,530.
Understated by $33,530.
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|
On July 10, 2016, Johnson Corporation signed a purchase commitment to purchase inventory for $360,000 on or before February 15, 2017. The company’s fiscal year-end is December 31. The contract was exercised on February 1, 2017 and the inventory was purchased for cash at the contract price. On the purchase date of February 1, the market price of the inventory was $368,000. The market price of the inventory on December 31, 2016, was $332,000. The company uses a perpetual inventory system. |
| How much loss on purchase commitment will Johnson recognize in 2016? |
$8,000.
$28,000.
$36,000.
None.
| On July 10, 2016, Johnson Corporation signed a purchase commitment to purchase inventory for $214,000 on or before February 15, 2017. The company’s fiscal year-end is December 31. The contract was exercised on February 1, 2017, and the inventory was purchased for cash at the contract price. On the purchase date of February 1, the market price of the inventory was $224,000. The market price of the inventory on December 31, 2016, was $187,000. The company uses a perpetual inventory system. |
| At what amount will Johnson record the inventory purchased on February 1, 2017? |
$197,000
$187,000
$224,000
$214,000
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|
Haskell Corporation has determined its year-end inventory on a FIFO basis to be $803,000. Information pertaining to that inventory is as follows: |
| Selling price | $832,000 |
| Costs to sell | 44,000 |
| Replacement cost | 774,000 |
| What should be the reported value of Haskell’s inventory if the company prepares its financial statements according to International Financial Reporting Standards (IFRS)? |
$709,000.
$774,000.
$788,000.
$803,000.
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