91. During 2017, Larue Co., a manufacturer of chocolate candies, contracted to purchase 250,000 pounds of cocoa beans at $4.00 per pound, delivery to be made in the spring of 2018. Because a record harvest is predicted for 2018, the price per pound for cocoa beans had fallen to $3.30 by December 31, 2017.
Of the following journal entries, the one which would properly reflect in 2017 the effect of the commitment of Larue Co. to purchase the 250,000 pounds of cocoa is
a. Cocoa Inventory 1,000
Accounts Payable 1,000
b. Cocoa Inventory 825,000
Loss on Purchase Commitments 175,000
Accounts Payable 1,000
c. Unrealized Holding Gain or Loss-Income 175,000
Estimated Liability on Purchase Commitments 175,000
d. No entry would be necessary in 2017
92. RS Corporation, a manufacturer of ethnic foods, contracted in 2017 to purchase 600 pounds of a spice mixture at $3.00 per pound, delivery to be made in spring of 2018. By 12/31/17, the price per pound of the spice mixture had risen to $3.25 per pound. In 2017, RS should recognize
a. a loss of $1,800.
b. a loss of $150.
c. no gain or loss.
d. a gain of $150.
93. LF Corporation, a manufacturer of Mexican foods, contracted in 2017 to purchase 2,000 pounds of a spice mixture at $5.00 per pound, delivery to be made in spring of 2018. By 12/31/17, the price per pound of the spice mixture had dropped to $4.70 per pound. In 2017, LF should recognize
a a loss of $10,000.
b. a loss of $600.
c. no gain or loss.
d. a gain of $600.
94. The following information is available for October for Barton Company.
Beginning inventory $350,000
Net purchases 1,050,000
Net sales 2,100,000
Percentage markup on cost 66.67%
A fire destroyed Barton’s October 31 inventory, leaving undamaged inventory with a cost of $21,000. Using the gross profit method, the estimated ending inventory destroyed by fire is
a. $119,000.
b. $539,000.
c. $560,000.
d. $700,000.
95. The following information is available for October for Norton Company.
Beginning inventory $400,000
Net purchases 1,200,000
Net sales 2,400,000
Percentage markup on cost 66.67%
A fire destroyed Norton’s October 31 inventory, leaving undamaged inventory with a cost of $24,000. Using the gross profit method, the estimated ending inventory destroyed by fire is
a. $136,000.
b. $616,000.
c. $640,000.
d. $800,000.
96. Miles Company, a wholesaler, budgeted the following sales for the indicated months:
June July August
Sales on account $2,700,000 $2,760,000 $2,850,000
Cash sales 270,000 300,000 390,000
Total sales $2,970,000 $3,060,000 $3,240,000
All merchandise is marked up to sell at its invoice cost plus 20%. Merchandise inventories at the beginning of each month are at 30% of that month's projected cost of goods sold.
The cost of goods sold for the month of June is anticipated to be
a. $2,109,375.
b. $2,320,310.
c. $2,165,625.
d. $2,475,000.
97. Miles Company, a wholesaler, budgeted the following sales for the indicated months:
June July August
Sales on account $2,700,000 $2,760,000 $2,850,000
Cash sales 270,000 300,000 390,000
Total sales $2,970,000 $3,060,000 $3,240,000
All merchandise is marked up to sell at its invoice cost plus 20%. Merchandise inventories at the beginning of each month are at 30% of that month's projected cost of goods sold.
Merchandise purchases for July are anticipated to be
a. $2,390,625.
b. $3,243,750.
c. $2,550,000.
d. $2,595,000.
98. Reyes Company had a gross profit of $620,000, total purchases of $840,000, and an ending inventory of $480,000 in its first year of operations as a retailer. Reyes’s sales in its first year must have been
a. $980,000.
b. $1,120,000.
c. $360,000.
d. $1,100,000.
99. A markup of 25% on cost is equivalent to what markup on selling price?
a. 20%
b. 25%
c. 75%
d. 80%
100. Kesler, Inc. estimates the cost of its physical inventory at March 31 for use in an interim financial statement. The rate of markup on cost is 25%. The following account balances are available:
Inventory, March 1 $550,000
Purchases 430,000
Purchase returns 20,000
Sales during March 750,000
The estimate of the cost of inventory at March 31 would be
a. $210,000.
b. $360,000.
c. $397,500.
d. $280,000.
101. On January 1, 2017, the merchandise inventory of Glaus, Inc. was $1,600,000. During 2017 Glaus purchased $3,200,000 of merchandise and recorded sales of $4,000,000. The gross profit rate on these sales was 25%. What is the merchandise inventory of Glaus at December 31, 2017?
a. $800,000.
b. $1,000,000.
c. $1,800,000.
d. $3,000,000.
102. For 2017, cost of goods available for sale for Tate Corporation was $4,500,000. The gross profit rate on sales was 20%. Sales for the year were $4,000,000. What was the amount of the ending inventory?
a. $0.
b. $1,300,000.
c. $900,000.
d. $800,000.
103. On April 15 of the current year, a fire destroyed the entire uninsured inventory of a retail store. The following data are available:
Sales, January 1 through April 15 $600,000
Inventory, January 1 100,000
Purchases, January 1 through April 15 500,000
Markup on cost 25%
The amount of the inventory loss is estimated to be
a. $120,000.
b. $60,000.
c. $150,000.
d. $100,000.
104. The inventory account of Irick Company at December 31, 2017, included the following items:
Inventory Amount
Merchandise out on consignment at sales price
(including markup of 40% on selling price) $60,000
Goods purchased, in transit (shipped f.o.b. shipping point) 48,000
Goods held on consignment by Irick 62,000
Goods out on approval (sales price $30,400, cost $25,600) 30,400
Based on the above information, the inventory account at December 31, 2017, should be reduced by
a. $90,800.
b. $90,400.
c. $138,800.
d. $102,800.
105. The sales price for a product provides a gross profit of 20% of sales price. What is the gross profit as a percentage of cost?
a. 17%.
b. 20%.
c. 25%.
d. Not enough information is provided to determine.
106. Gamma Ray Corp. has annual sales totaling $1,170,000 and an average gross profit of 20% of cost. What is the dollar amount of the gross profit?
a. $234,000.
b. $175,500.
c. $195,000.
d. $292,500.
107. On August 31, a hurricane destroyed a retail location of Vinny's Clothier including the entire inventory on hand at the location. The inventory on hand as of June 30 totaled $1,920,000. Since June 30 until the time of the hurricane, the company made purchases of $510,000 and had sales of $1,500,000. Assuming the rate of gross profit to selling price is 40%, what is the approximate value of the inventory that was destroyed?
a. $1,920,000.
b. $1,089,000.
c. $1,230,000.
d. $1,530,000.
108. On October 31, a fire destroyed PH Inc.'s entire retail inventory. The inventory on hand as of January 1 totaled $2,720,000. From January 1 through the time of the fire, the company made purchases of $660,000 and had sales of $1,440,000. Assuming the rate of gross profit to selling price is 40%, what is the approximate value of the inventory that was destroyed?
a. $2,720,000.
b. $2,692,000.
c. $1,940,000.
d. $2,516,000.
109. On March 15, a fire destroyed Interlock Company's entire retail inventory. The inventory on hand as of January 1 totaled $6,600,000. From January 1 through the time of the fire, the company made purchases of $2,732,000, incurred freight-in of $312,000, and had sales of $4,840,000. Assuming the rate of gross profit to selling price is 30%, what is the approximate value of the inventory that was destroyed?
a. $8,192,000.
b. $5,944,000.
c. $6,256,000.
d. $9,644,000.
110. Dicer uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $390,000 ($594,000), purchases during the current year at cost (retail) were $2,055,000 ($3,300,000), freight-in on these purchases totaled $129,000, sales during the current year totaled $3,000,000, and net markups (markdowns) were $72,000 ($108,000). What is the ending inventory value at cost?
a. $556,842.
b. $567,138.
c. $580,206.
d. $858,000.
111. Boxer Inc. uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $393,500 ($594,000), purchases during the current year at cost (retail) were $3,408,000 ($5,193,600), freight-in on these purchases totaled $159,500, sales during the current year totaled $4,666,000, and net markups were $414,000. What is the ending inventory value at cost?
a. $1,535,600.
b. $1,082,850.
c. $981,248.
d. $1,050,350.
112. Barker Pet supply uses the conventional retail method to determine its ending inventory at cost. Assume the beginning inventory at cost (retail) were $796,800 ($980,700), purchases during the current year at cost (retail) were $3,205,800 ($4,158,300), freight-in on these purchases totaled $191,700, sales during the current year totaled $4,056,000, and net markups (markdowns) were $6,000 ($288,900). What is the ending inventory value at cost?
a. $800,100.
b. $652,082.
c. $1,083,000.
d. $882,645.
113. Crane Sales Company uses the retail inventory method to value its merchandise inventory. The following information is available for the current year:
Cost Retail
Beginning inventory $ 30,000 $ 45,000
Purchases 190,000 260,000
Freight-in 2,500 —
Net markups — 8,500
Net markdowns — 10,000
Employee discounts — 1,000
Sales revenue — 205,000
If the ending inventory is to be valued at the lower-of-cost-or-market, what is the cost-to-retail ratio?
a. $222,500 ÷ $305,000
b. $222,500 ÷ $313,500
c. $220,000 ÷ $315,000
d. $222,500 ÷ $303,500
114. The following data concerning the retail inventory method are taken from the financial records of Welch Company.
Cost Retail
Beginning inventory $ 196,000 $ 280,000
Purchases 896,000 1,280,000
Freight-in 24,000 —
Net markups — 80,000
Net markdowns — 56,000
Sales — 1,344,000
The ending inventory at retail should be
a. $296,000.
b. $240,000.
c. $256,000.
d. $168,000.
115. The following data concerning the retail inventory method are taken from the financial records of Welch Company.
Cost Retail
Beginning inventory $ 196,000 $ 280,000
Purchases 896,000 1,280,000
Freight-in 24,000 —
Net markups — 80,000
Net markdowns — 56,000
Sales — 1,344,000
If the ending inventory is to be valued at approximately the lower of cost or market, the calculation of the cost-to-retail ratio should be based on goods available for sale at (1) cost and (2) retail, respectively of
a. $1,116,000 and $1,640,000.
b. $1,116,000 and $1,584,000.
c. $1,116,000 and $1,560,000.
d. $1,092,000 and $1,560,000.
116. The following data concerning the retail inventory method are taken from the financial records of Welch Company.
Cost Retail
Beginning inventory $ 196,000 $ 280,000
Purchases 896,000 1,280,000
Freight-in 24,000 —
Net markups — 80,000
Net markdowns — 56,000
Sales — 1,344,000
If the foregoing figures are verified and a count of the ending inventory reveals that merchandise actually on hand amounts to $144,000 at retail, the business has
a. realized a windfall gain.
b. sustained a loss.
c. no gain or loss as there is close coincidence of the inventories.
d. sustained a deferred gain.
*117. The following data concerning the retail inventory method are taken from the financial records of Welch Company.
Cost Retail
Beginning inventory $ 196,000 $ 280,000
Purchases 896,000 1,280,000
Freight-in 24,000 —
Net markups — 80,000
Net markdowns — 56,000
Sales — 1,344,000
Assuming no change in the price level if the LIFO inventory method were used in conjunction with the data, the ending inventory at cost would be
a. $170,800.
b. $168,000.
c. $163,400.
d. $172,600.
*118. The following data concerning the retail inventory method are taken from the financial records of Welch Company.
Cost Retail
Beginning inventory $ 196,000 $ 280,000
Purchases 896,000 1,280,000
Freight-in 24,000 —
Net markups — 80,000
Net markdowns — 56,000
Sales — 1,344,000
Assuming that the LIFO inventory method were used in conjunction with the data and that the inventory at retail had increased during the period, then the computation of retail in the cost-to-retail ratio would
a. exclude both markups and markdowns and include beginning inventory.
b. include markups and exclude both markdowns and beginning inventory.
c. include both markups and markdowns and exclude beginning inventory.
d. exclude markups and include both markdowns and beginning inventory.
119. Drake Corporation had the following amounts, all at retail:
Beginning inventory $ 3,600 Purchases $145,000
Purchase returns 6,000 Net markups 18,000
Abnormal shortage 4,000 Net markdowns 2,800
Sales revenue 77,000 Sales returns 1,800
Employee discounts 1,600 Normal shortage 2,600
What is Drake’s ending inventory at retail?
a. $74,400.
b. $76,000.
c. $77,600.
d. $78,400
120. Goren Corporation had the following amounts, all at retail:
Beginning inventory $ 3,600 Purchases $120,000
Purchase returns 6,000 Net markups 18,000
Abnormal shortage 4,000 Net markdowns 2,800
Sales 77,000 Sales returns 1,800
Employee discounts 1,600 Normal shortage 2,600
What is Goren’s ending inventory at retail?
a. $49,400.
b. $51,000.
c. $52,600.
d. $53,400
121. Fry Corporation’s computation of cost of goods sold is:
Beginning inventory $ 60,000
Add: Cost of goods purchased 530,000
Cost of goods available for sale 590,000
Less: Ending inventory 90,000
Cost of goods sold $500,000
The average days to sell inventory for Fry are
a. 46.2 days.
b. 51.4 days.
c. 54.5 days.
d. 65.2 days.
122. East Corporation’s computation of cost of goods sold is:
Beginning inventory $ 60,000
Add: Cost of goods purchased 482,000
Cost of goods available for sale 542,000
Ending inventory 70,000
Cost of goods sold $472,000
The average days to sell inventory for East are
a. 44.0 days.
b. 47.4 days.
c. 50.0 days.
d. 54.0 days.
123. The 2017 financial statements of Sito Company reported a beginning inventory of $80,000, an ending inventory of $120,000, and cost of goods sold of $700,000 for the year. Sito’s inventory turnover for 2017 is
a. 8.8 times.
b. 7.0 times.
c. 5.8 times.
d. 4.8 times.
124. Boxer Inc. reported inventory at the beginning of the current year of $360,000 and at the end of the current year of $411,000. If net sales for the current year are $4,429,200 and the corresponding cost of sales totaled $3,321,900, what is the inventory turnover for the current year?
a. 11.49.
b. 8.08.
c. 10.78.
d. 8.62.
125. Plank Co. uses the retail inventory method. The following information is available for the current year.
Cost Retail
Beginning inventory $ 312,000 $488,000
Purchases 1,180,000 1,660,000
Freight-in 20,000 —
Employee discounts — 8,000
Net markups — 60,000
Net markdowns — 80,000
Sales revenue — 1,560,000
If the ending inventory is to be valued at approximately lower of average cost or market, the calculation of the cost ratio should be based on cost and retail of
a. $1,200,000 and $1,720,000.
b. $1,200,000 and $1,712,000.
c. $1,492,000 and $2,200,000.
d. $1,512,000 and $2,208,000.
126. Plank Co. uses the retail inventory method. The following information is available for the current year.
Cost Retail
Beginning inventory $ 312,000 $488,000
Purchases 1,180,000 1,660,000
Freight-in 20,000 —
Employee discounts — 8,000
Net markups — 60,000
Net markdowns — 80,000
Sales revenue — 1,560,000
The ending inventory at retail should be
a. $640,000.
b. $600,000.
c. $576,000.
d. $560,000.
127. Plank Co. uses the retail inventory method. The following information is available for the current year.
Cost Retail
Beginning inventory $ 312,000 $488,000
Purchases 1,180,000 1,660,000
Freight-in 20,000 —
Employee discounts — 8,000
Net markups — 60,000
Net markdowns — 80,000
Sales revenue — 1,560,000
The approximate cost of the ending inventory by the conventional retail method is
a. $383,600.
b. $379,680.
c. $392,000.
d. $409,920.
*128. Plank Co. uses the retail inventory method. The following information is available for the current year.
Cost Retail
Beginning inventory $ 312,000 $488,000
Purchases 1,180,000 1,660,000
Freight-in 20,000 —
Employee discounts — 8,000
Net markups — 60,000
Net markdowns — 80,000
Sales revenue — 1,560,000
If the ending inventory is to be valued at approximately LIFO cost, the calculation of the cost ratio should be based on cost and retail amounts of
a. $1,512,000 and $2,208,000.
b. $1,512,000 and $1,128,000.
c. $1,200,000 and $1,640,000.
d. $1,200,000 and $1,720,000.
*129. Plank Co. uses the retail inventory method. The following information is available for the current year.
Cost Retail
Beginning inventory $ 312,000 $488,000
Purchases 1,180,000 1,660,000
Freight-in 20,000 —
Employee discounts — 8,000
Net markups — 60,000
Net markdowns — 80,000
Sales revenue — 1,560,000
Assuming that the LIFO inventory method is used, that the beginning inventory is the base inventory when the index was 100, and that the index at year end is 112, the ending inventory at dollar-value LIFO retail cost is
a. $321,838.
b. $371,028.
c. $383,600.
d. $409,920.
*130. Eaton Company, which uses the retail LIFO method to determine inventory cost, has provided the following information for 2017:
Cost Retail
Inventory, 1/1/17 $ 282,000 $420,000
Net purchases 1,134,000 1,686,000
Net markups 204,000
Net markdowns 90,000
Net sales 1,590,000
Assuming stable prices (no change in the price index during 2017), what is the cost of Eaton's inventory at December 31, 2017?
a. $384,300.
b. $414,300.
c. $408,000.
d. $396,900.
*131. Eaton Company, which uses the retail LIFO method to determine inventory cost, has provided the following information for 2017:
Cost Retail
Inventory, 1/1/17 $ 282,000 $420,000
Net purchases 1,134,000 1,686,000
Net markups 204,000
Net markdowns 90,000
Net sales 1,590,000
Assuming that the price index was 105 at December 31, 2017 and 100 at January 1, 2017, what is the cost of Eaton's inventory at December 31, 2017 under the dollar-value-LIFO retail method?
a. $401,070.
b. $416,745.
c. $420,915.
d. $395,400.
