Question 1

Noll Co.had 450 units of product A on hand at January 1, 2007, costing $42 each.Purchases of product A during January were as follows: $\begin{array}{rrr}\text { Date}&\text { Units}&\text { Unit Cost }\
\hline \text { Jan. } 10 & 600 & \$ 44 \
18 & 750 & 46 \
28 & 300 & 48
\end{array}$

A physical count on January 31, 2007 shows 600 units of product A on hand.The cost of the inventory at January 31, 2007 under the LIFO method is
A)$28,200.
B)$26,700.
C)$25,500.
D)$24,600.

Accepted Answer

The answer of Noll Co.had 450 units of product A...

Question 2

Carr Co.adopted the dollar-value LIFO inventory method on December 31, 2007.Carr's entire inventory constitutes a single pool.On December 31, 2007, the inventory was $320,000 under the dollar-value LIFO method.Inventory data for 2008 are as follows:

12/31/08 inventory at year-end prices $440,000
Relevant price index at year end (base year 2007) 110

Using dollar value LIFO, Carr's inventory at December 31, 2008 is
A)$352,000.
B)$408,000.
C)$400,000.
D)$440,000.

Accepted Answer

The answer of Carr Co.adopted the dollar-value LIFO inventory method...

Question 3

Use the following information for 
Ely Company had January 1 inventory of $100,000 when it adopted dollar-value LIFO.During the year, purchases were $600,000 and sales were $1,000,000.December 31 inventory at year-end prices was $126,500, and the price index was 110.
-What is Ely Company's gross profit?
A)$415,000.
B)$416,500.
C)$426,500.
D)$883,500.

Accepted Answer

First, we need to calculate the ending inventory at base year prices:
Ending inventory at year-end prices = $126,500
Price index = 110
Ending inventory at base year prices = Ending inventory at year-end prices / price index = $126,500 / 1.10 = $115,000

Next, we need to calculate the Cost of Goods Sold (COGS) using dollar-value LIFO:
COGS = Inventory at base year prices + Purchases - Ending inventory at base year prices
COGS = $100,000 + $600,000 - $115,000 = $585,000

Finally, we can calculate gross profit:
Gross profit = Sales - COGS
Gross profit = $1,000,000 - $585,000 = $415,000

Therefore, the best choice is B ($416,500).

Question 4

The following information was derived from the 2007 accounting records of Logan Co.: $\begin{array}{lrr}&& \text {Logan's Goods }\& \text { Logan 's Central Warehouse}& \text {Held by Consignees }\  \hline
\text { Beginning inventory } & \$ 130,000 & \$ 14,000 \
\text { Purchases } & 575,000 & 70,000 \
\text { Freight-in } & 10,000 &\\text { Transportation to consignees } & & 5,000 \
\text { Freight-out } & 30,000 & 8,000 \
\text { Ending inventory } & 145,000 & 20,000
\end{array}$ Logan 's 2007 cost of sales was
A)$570,000.
B)$600,000.
C)$634,000.
D)$639,000.

Accepted Answer

Cost of goods sold = Beginning inventory + Purchases + Freight-in - Ending inventory= 130,000 + 575,000 + 10,000 - 145,000= $634,000

Question 5

Dark Co.recorded the following data pertaining to raw material X during January 2007: The moving-average unit cost of X inventory at January 31, 2007 is
A)$8.70.
B)$8.85.
C)$9.00.
D)$9.40.

Accepted Answer

The answer of Dark Co.recorded the following data pertaining to...

Question 6

Use the following information for questions 
Dolan Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2005.Its inventory at that date was $220,000 and the relevant price index was 100.Information regarding inventory for subsequent years is as follows: $\begin{array}{lrr}& \text { Inventory at } & \text { Current } \
\text { Date } & \text { Current Prices } & \text { Price Index }\\hline
\text { December 31, 2006 } & \$ 256,800 & 107 \
\text { December 31, 2007 } & 290,000 & 125 \
\text { December 31,2008 } & 325,000 & 130
\end{array}$
-What is the cost of the ending inventory at December 31, 2006 under dollar-value LIFO?
A)$240,000.
B)$256,800.
C)$241,400.
D)$235,400.

Accepted Answer

To calculate the ending inventory under dollar-value LIFO, first convert the ending inventory to base year prices: $256,800 / 1.07 = $240,000. The increase in base year inventory is $240,000 - $220,000 = $20,000. Convert this increase back to current year prices: $20,000 * 1.07 = $21,400. Add this to the base year inventory: $220,000 + $21,400 = $241,400.

Question 7

Tate Company adopted the dollar-value LIFO method on January 1, 2007, at which time its inventory consisted of 6,000 units of Item A @ $5.00 each and 3,000 units of Item B @ $16.00 each.The inventory at December 31, 2007 consisted of 12,000 units of Item A and 7,000 units of Item B.The most recent actual purchases related to these items were as follows: $\begin{array}{rlrr}&& \text {Quantity }\
 \text { Items }& \text { Purchase Date}& \text { Purchased}& \text {Cost Per Unit }\\hline
\mathrm{A} & 12 / 7 / 07 & 2,000 & \$ 6.00 \
\mathrm{~A} & 12 / 11 / 07 & 10,000 & 5.75 \
\mathrm{~B} & 12 / 15 / 07 & 10,000 & 17.00
\end{array}$ Using the double-extension method, what is the price index for 2007 that should be computed by Tate Company?
A)108.33%
B)109.59%
C)111.05%
D)220.51%

Accepted Answer

The price index is calculated by dividing the ending inventory at current-year costs by the ending inventory at base-year costs. The ending inventory at current-year costs is $126,000 (12,000 units of A at $5.75 and 7,000 units of B at $17.00). The ending inventory at base-year costs is $115,000 (12,000 units of A at $5.00 and 7,000 units of B at $16.00). The price index is ($126,000 / $115,000) * 100 = 109.59%.

Question 8

Earl Co.was formed on January 2, 2007, to sell a single product.Over a two-year period, Earl's acquisition costs have increased steadily.Physical quantities held in inventory were equal to three months' sales at December 31, 2007, and zero at December 31, 2008.Assuming the periodic inventory system, the inventory cost method which reports the highest amount of each of the following is

$\begin{array}{lll}
&\text { Inventory } & \text { Cost of Sales } \
&\text { December 31, 2007 }&2008\ \hline
\end{array}$
A)  $~~~~~~~~$LIFO  $~~~~~~~~$$~~~~~~~~$$~~~~~~~~$FIFO 
B)$~~~~~~~~$ LIFO  $~~~~~~~~$$~~~~~~~~$$~~~~~~~~$LIFO 
C) $~~~~~~~~$FIFO $~~~~~~~~$$~~~~~~~~$$~~~~~~~~$FIFO  
D)$~~~~~~~~$ FIFO  $~~~~~~~~$$~~~~~~~~$$~~~~~~~~$LIFO

Accepted Answer

The answer of Earl Co.was formed on January 2, 2007,...

Question 9

How should the following costs affect a retailer's inventory valuation? $\begin{array}{lcc} 
& \text { Freight-in } & \text { Interest on Inventory Loan } \\hline\end{array}$
A) $~~~~~~~~$Increase  $~~~~~~~~$$~~~~~~~~$No effect  
B) $~~~~~~~~$ Increase$~~~~~~~~$$~~~~~~~~$  Increase 
C)$~~~~~~~~$ No effect $~~~~~~~~$$~~~~~~~~$  Increase  
D) $~~~~~~~~$No effect$~~~~~~~~$$~~~~~~~~$  No effect

Accepted Answer

The answer of How should the following costs affect a...

Question 10

During periods of rising prices, a perpetual inventory system would result in the same dollar amount of ending inventory as a periodic inventory system under which of the following inventory cost flow methods?

$\underline{\text{   FIFO}}$$~~~~~~~~$$~~~~~~~~$$\underline{\text{ LIFO  }}$  
A) Yes $~~~~~~~~$ $~~~~~~~~$  No
B) Yes$~~~~~~~~$ $~~~~~~~~~~$ Yes
C) No$~~~~~~~~$ $~~~~~ ~~~~$ Yes
D) No$~~~~~~~~$ $~~~~~~~~~~$  No

Accepted Answer

The answer of During periods of rising prices, a perpetual...

Question 11

Tysen Retailers purchased merchandise with a list price of $50,000, subject to trade discounts of 20% and 10%, with no cash discounts allowable.Tysen should record the cost of this merchandise as
A)$35,000.
B)$36,000.
C)$39,000.
D)$50,000.

Accepted Answer

The trade discounts are applied sequentially. First, a 20% discount on $50,000 reduces the price to $40,000. Then, a 10% discount on $40,000 reduces the price to $36,000.

Question 12

Use the following information for questions 
Dolan Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2005.Its inventory at that date was $220,000 and the relevant price index was 100.Information regarding inventory for subsequent years is as follows: $\begin{array}{lrr}& \text { Inventory at } & \text { Current } \
\text { Date } & \text { Current Prices } & \text { Price Index }\\hline
\text { December 31, 2006 } & \$ 256,800 & 107 \
\text { December 31, 2007 } & 290,000 & 125 \
\text { December 31,2008 } & 325,000 & 130
\end{array}$
-What is the cost of the ending inventory at December 31, 2007 under dollar-value LIFO?
A)$232,000.
B)$231,400.
C)$232,840.
D)$240,000.

Accepted Answer

To calculate the ending inventory under dollar-value LIFO, convert the inventory at current prices to base-year prices, apply LIFO layers, and then convert back to current prices. For 2007: Base-year inventory = $290,000 / 1.25 = $232,000. The increase from 2006 is $232,000 - $220,000 = $12,000. Convert this increase to 2007 prices: $12,000 * 1.25 = $15,000. Add this to the 2006 layer at 2007 prices: $220,000 * 1.07 = $235,400. Total = $235,400 + $15,000 = $250,400.

Question 13

Use the following information for 
Ely Company had January 1 inventory of $100,000 when it adopted dollar-value LIFO.During the year, purchases were $600,000 and sales were $1,000,000.December 31 inventory at year-end prices was $126,500, and the price index was 110.
-What is Ely Company's ending inventory?
A)$110,000.
B)$115,000.
C)$116,500.
D)$126,500.

Accepted Answer

To calculate Ely Company's ending inventory using dollar-value LIFO, we need to convert all inventory amounts to end-of-year prices using the price index.

First, we need to calculate the total value of inventory at the end of the year using the base-year cost of $100,000 and the price index of 110:

$100,000 x (110/100) = $110,000

Next, we need to add the value of all purchases made during the year:

$600,000 x (110/100) = $660,000

Now we have a total inventory value of $770,000 (base-year cost plus purchases at end-of-year prices).

To determine the ending inventory, we need to match the cost of goods sold (COGS) to this total inventory value, using the LIFO method.

COGS = $1,000,000 x (110/100) = $1,100,000

Starting with the most recent purchases, we subtract their value from COGS until it matches the total inventory value:

(1) $660,000 - $126,500 = $533,500 
(2) $533,500 - $100,000 = $433,500

Therefore, Ely Company's ending inventory is $433,500 at end-of-year prices, or $116,500 at base-year cost (using the price index to convert back). The answer is C) $116,500.

Question 14

Use the following information for 
AJ Company had January 1 inventory of $100,000 when it adopted dollar-value LIFO.During the year, purchases were $600,000 and sales were $1,000,000.December 31 inventory at year-end prices was $143,360, and the price index was 112.
-What is AJ Company's ending inventory?
A)$100,000.
B)$128,000.
C)$131,360.
D)$143,360.

Accepted Answer

To find the ending inventory using dollar-value LIFO, we need to convert all inventory amounts to dollar values using the price index.

Starting inventory in dollars = $100,000 x 112/100 = $112,000

Purchases in dollars = $600,000 x 112/100 = $672,000

Next, we need to calculate the total cost of goods sold for the year:

Cost of goods sold = starting inventory + purchases - ending inventory

Cost of goods sold = $112,000 + $672,000 - $143,360 x 112/100 = $540,480

Finally, we can calculate the ending inventory:

Ending inventory = starting inventory + purchases - cost of goods sold

Ending inventory = $112,000 + $672,000 - $540,480 = $243,520

However, since we are using dollar-value LIFO, we need to adjust the ending inventory back to base-year dollars:

Ending inventory in base-year dollars = $243,520 / 112/100 = $217,000

Therefore, the correct answer is C: $131,360.

Question 15

Use the following information for questions 
Dolan Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2005.Its inventory at that date was $220,000 and the relevant price index was 100.Information regarding inventory for subsequent years is as follows: $\begin{array}{lrr}& \text { Inventory at } & \text { Current } \
\text { Date } & \text { Current Prices } & \text { Price Index }\\hline
\text { December 31, 2006 } & \$ 256,800 & 107 \
\text { December 31, 2007 } & 290,000 & 125 \
\text { December 31,2008 } & 325,000 & 130
\end{array}$
-What is the cost of the ending inventory at December 31, 2008 under dollar-value LIFO?
A)$256,240.
B)$254,800.
C)$250,000.
D)$263,400.

Accepted Answer

The ending inventory at December 31, 2008 under dollar-value LIFO is $256,240. This is calculated by multiplying the ending inventory at current prices by the base year price index and dividing by the current year price index.Ending inventory at current prices = $325,000Base year price index = 100Current year price index = 130Ending inventory at December 31, 2008 under dollar-value LIFO = $325,000 x 100 / 130 = $256,240

Question 16

When the double extension approach to the dollar-value LIFO inventory cost flow method is used, the inventory layer added in the current year is multiplied by an index number.How would the following be used in the calculation of this index number?

$\begin{array}{ll} &\text { Ending inventory}& \text {  at current year cost}\&\text { Ending inventory}& \text { at base year cost}\ \hline\end{array}$
A)$~~~~~~~~$ Numerator  $~~~~~~~~$$~~~~~~~~$$~~~~~~~~$Denominator 
B)$~~~~~~~~$ Numerator  $~~~~~~~~$$~~~~~~~~$$~~~~~~~~$Not used  
C) $~~~~~~~~$Denominator  $~~~~~~~~$$~~~~~~~~$$~~~ ~ ~$Numerator 
D) $~~~~~~~~$Not used  $~~~~~~~~$$~~~~~~~~$$~~~~~~~~~~$Denominator

Accepted Answer

The answer of When the double extension approach to the...

Question 17

The following information applied to Grey, Inc.for 2007: $\begin{array}{lr}
\text { Merchandise purchased for resale } & \$ 300,000 \
\text { Freight-in } & 8,000 \
\text { Freight-out } & 5,000 \
\text { Purchase returns } & 2,000
\end{array}$
 Grey's 2007 inventoriable cost was
A)$300,000.
B)$303,000.
C)$306,000.
D)$311,000.

Accepted Answer

The answer of The following information applied to Grey, Inc.for...

Question 18

Use the following information for 
AJ Company had January 1 inventory of $100,000 when it adopted dollar-value LIFO.During the year, purchases were $600,000 and sales were $1,000,000.December 31 inventory at year-end prices was $143,360, and the price index was 112.
-What is AJ Company's gross profit?
A)$428,000.
B)$431,360.
C)$443,460.
D)$868,640.

Accepted Answer

To calculate AJ Company's gross profit under dollar-value LIFO, we need to first determine the ending inventory at base-year (January 1) prices.

Ending inventory at year-end prices = $143,360 
Price index = 112

Ending inventory at base-year prices = $143,360 ÷ 1.12 = $128,000

Next, we need to calculate the cost of goods sold (COGS) for the year:

Beginning inventory at base-year prices = $100,000 
Purchases = $600,000

Total goods available for sale = $700,000

COGS = Total goods available for sale - Ending inventory at base-year prices = $700,000 - $128,000 = $572,000

Finally, we can calculate gross profit:

Sales = $1,000,000 
COGS = $572,000

Gross profit = Sales - COGS = $1,000,000 - $572,000 = $428,000

Therefore, the best choice is B.

Quiz 8: Valuation of Inventories: a Cost-Basis Approach

Dark Co.recorded the following data pertaining to raw material X during January 2007: The moving-average unit cost of X inventory at January 31, 2007 is

How should the following costs affect a retailer's inventory valuation? $\begin{array}{lcc} & \text { Freight-in } & \text { Interest on Inventory Loan } \\\hline\end{array}$

During periods of rising prices, a perpetual inventory system would result in the same dollar amount of ending inventory as a periodic inventory system under which of the following inventory cost flow methods? $\underline{\text{ FIFO}}$ $$ $$ $\underline{\text{ LIFO }}$

Tysen Retailers purchased merchandise with a list price of $50,000, subject to trade discounts of 20% and 10%, with no cash discounts allowable.Tysen should record the cost of this merchandise as

The following information applied to Grey, Inc.for 2007: $\begin{array}{lr}\text { Merchandise purchased for resale } & \$ 300,000 \\\text { Freight-in } & 8,000 \\\text { Freight-out } & 5,000 \\\text { Purchase returns } & 2,000\end{array}$ Grey's 2007 inventoriable cost was

Quiz 8: Valuation of Inventories: a Cost-Basis Approach

Dark Co.recorded the following data pertaining to raw material X during January 2007: The moving-average unit cost of X inventory at January 31, 2007 is

How should the following costs affect a retailer's inventory valuation? Freight-in Interest on Inventory Loan \begin{array}{lcc} & \text { Freight-in } & \text { Interest on Inventory Loan } \\\hline\end{array}​ Freight-in ​ Interest on Inventory Loan ​​

Tysen Retailers purchased merchandise with a list price of $50,000, subject to trade discounts of 20% and 10%, with no cash discounts allowable.Tysen should record the cost of this merchandise as

How should the following costs affect a retailer's inventory valuation? $\begin{array}{lcc} & \text { Freight-in } & \text { Interest on Inventory Loan } \\\hline\end{array}$