Question: The following questions are used in the Kaplan CPA Review 180018

The following questions are used in the Kaplan CPA Review Course to study inventory while preparing for the CPA examination. Determine the response that best completes the statements or questions.

1. Kahn Co., in applying the lower of cost or market method, reports its inventory at replacement cost. Which of the following statements are correct?

2. Moss Co. has determined its year-end inventory on a FIFO basis to be $400,000. Information pertaining to that inventory is as follows:

What should be the carrying value of Moss's inventory?
a. $328,000
b. $360,000
c. $388,000
d. $400,000

3. On May 2, a fire destroyed the entire merchandise inventory on hand of Sanchez Wholesale Corporation. The following information is available:

What is the estimated inventory on May 2 immediately prior to the fire?
a. $ 70,000
b. $ 82,000
c. $110,000
d. $122,000

4. Hutch, Inc., uses the conventional retail inventory method to account for inventory. The following information relates to current year's operations:

What amount should be reported as cost of sales for the year?
a. $480,000
b. $487,500
c. $500,000
d. $525,000

5. Bren Co.'s beginning inventory on January 1 was understated by $26,000, and its ending inventory on December 31 was overstated by $52,000. As a result, Bren's cost of goods sold for the year was
a. Understated by $26,000.
b. Overstated by $78,000.
c. Understated by $78,000.
d. Overstated by $26,000.

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