Multiple choice questions 1 Sienna Company has inventory with a selling
Multiple choice questions
1. Sienna Company has inventory with a selling price of $ 100, packaging costs of $ 5, and transportation costs of $ 10. Sienna’s normal profit margin is $ 20. However, due to limited supply of the product from the manufacturer, it would cost Sienna $ 90 to replace the inventory. What amount should be used as the market value?
a. $ 65
b. $ 85
c. $ 90
d. $ 100
2. Moore Company carries Product A in inventory on December 31, 2016, at its unit cost of $ 9.50. Because of a sharp decline in demand for the product, the selling price was reduced to $ 10.00 per unit. Moore’s normal profit margin on Prod-uct A is $ 2.00, disposal costs are $ 1.00 per unit, and the replacement cost is $ 6.50. Under the lower of cost or market rule, Moore’s December 31, 2016, inventory of Product A should be valued at a unit cost of:
a. $ 6.50
b. $ 7.00
c. $ 9.00
d. $ 9.50
3. The replacement cost of an inventory item is below the net realizable value and above the net realizable value minus the normal profit margin. The original cost of the inventory item is above the replacement cost and below the net realizable value. As a result, under the lower of cost or market rule, the inventory item should be valued at the:
a. net realizable value
b. original cost
c. replacement cost
d. net realizable value minus the normal profit margin
4. The following information is available for Silver Company for the three months ended March 31, 2016:
Merchandise inventory, January 1,
2016.......... $ 900,000
Purchases........ 3,400,000
Freight- in....... 200,000
Sales......... 4,800,000
5. The gross margin recorded was 25% of sales. What should be the merchandise inventory at March 31, 2016?
a. $ 700,000
b. $ 900,000
c. $ 1,125,000
d. $ 1,200,000
6. Hestor Company’s records indicate the following information:
Merchandise inventory, January 1,
2016..................... $ 550,000
Purchases, January 1 through December 31, 2016..... 2,250,000
Sales, January 1 through December 31, 2016....... 3,000,000
On December 31, 2016, a physical inventory determined that ending inventory of $ 600,000 was in the warehouse. Hestor’s gross profit on sales has remained constant at 30%. Hestor suspects some of the inventory may have been taken by some new employees. At December 31, 2016, what is the estimated cost of missing inventory?
a. $ 100,000
b. $ 300,000
c. $ 200,000
d. $ 700,000
7. Under the retail inventory method freight-in would be included in the calculation of the goods available for sale for which of the following?
8. The retail inventory method would include which of the following in the calculation of the goods available for sale at both cost and reatial?
a. freight-in
b. purchases returns
c. markups
d. markdowns
9. At December 31, 2016, the following information was available from Crisford Company’s books:
Sales for year totaled $110,600; markdowns amounted to $1,400. Under the approximate lower of average cost or market retail method, Crisford’s inventory at December 31, 2016, was
a. $30,800
b. $28,000
c. $21,560
d. $19,600
10. Estimaes of price-level changes for specific inventories are required for which of the following inventory method?
a. Conventional retial
b. weighted average cost
d. dollar-value retail LIFO
A company forgets to record a purchase on cccredit in the purchase account, but ending inventory is correct. The effect of this mistake in the current year is:
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