1. So. California Inc., through no fault of its own, lost an entire plant due to an...
Question:
1. So. California Inc., through no fault of its own, lost an entire plant due to an earthquake on May 1, 2006. In preparing their insurance claim on the inventory loss, they developed the following data: Inventory January 1, 2006, $300,000; sales and purchases from January 1, 2006, to May 1, 2006, $1,300,000 and $875,000, respectively. So, California consistently reports a 40% gross profit. The estimated inventory on May 1, 2006, is:
a) $302,500
b) $360,000
c) $395,000
d) $455,000
2. Nu Company reported the following pretax data for its first year of operations.
Net sales 2,800 Cost of goods available for sale 2,500 Operating expenses 880 Effective tax rate 40% Ending inventories: If LIFO is elected 820 If FIFO is elected 1,060
What is Nu's gross profit percentage if it elects LIFO?
a) 80%
b) 49%
c) 40%
d) 5%
3. The inventory method that will always produce the same amount for cost of goods sold in a periodic inventory system as in a perpetual inventory system would be:
a) FIFO
b) LIFO
c) Weighted average
d) None of the above
4. In a period when prices are falling and inventory quantities are stable, the lowest taxable income would be reported by using the inventory method of:
a) Weighted average
b) LIFO
c) Moving average
d) FIFO
5. A retrospective treatment of prior years' financial statements is required when there is a change from:
a) Average cost to LIFO
b) FIFO to LIFO
c) LIFO to average cost
d) All of the above
Managerial Economics and Strategy
ISBN: 978-0321566447
1st edition
Authors: Jeffrey M. Perloff, James A. Brander