1. To determine the value of a LIFO layer, using dollar-value LIFO retail: (Poin

Question

1. To determine the value of a LIFO layer, using dollar-value LIFO retail: (Points : 1)        Divide the LIFO layer by the layer year price index and multiply by the layer year cost-to-retail percentage.
       Multiply the LIFO layer by the base year price index and the current year cost-to-retail percentage.
       Multiply the LIFO layer by the layer year price index and by the layer year cost-to-retail percentage.
       Divide the LIFO layer by the layer year cost-to-retail percentage and multiply by the layer year price index. Question 2.2. To determine if an increase in the dollar value of inventory is due to increased quantities, using dollar-value LIFO retail: (Points : 1)        Compare beginning and ending inventory amounts at current year prices.
       Compare beginning and ending inventory amounts after adjusting both amounts to the average price level for the year.
       Inflate beginning inventory amount to end of year prices and compare to ending inventory amount.
       Deflate the ending inventory amount to beginning of year prices and compare to the beginning inventory amount. Question 3.3. 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: (Points : 1)        $302,500.
       $360,000.
       $395,000.
       $455,000. Question 4.4. Using the dollar-value LIFO retail method for inventory,: (Points : 1)        Is the same as dollar-value LIFO, except that the inventory is measured at retail, rather than at cost.
       Combines retail LIFO accounting with dollar-value LIFO accounting
       Allows companies to report inventory on the balance sheet at retail prices.
       All of the above are correct. Question 5.5. Under the gross method, purchase discounts taken are: (Points : 1)        Deducted from interest expense.
       Added to net purchases.
       Added to interest income.
       Deducted from purchases. Question 6.6. 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: (Points : 1)        FIFO.
       LIFO.
       Weighted average.
       None of the above. Question 7.7. Cost of goods sold is given by: (Points : 1)        Beginning inventory - net purchases + ending inventory.
       Beginning inventory + accounts payable - net purchases.
       Net purchases + ending inventory - beginning inventory.
       Net Purchases + beginning inventory - ending inventory. Question 8.8. An argument against the use of LCM is its lack of: (Points : 1)        Relevance.
       Reliability.
       Consistency.
       Objectivity. Question 9.9. The primary reason for the popularity of LIFO is that it gives: (Points : 1)        Better matching of physical flow and cost flow.
       A deferral of income tax.
       Simplified recordkeeping.
       A permanent reduction of income taxes. Question 10.10. Inventory does not include: (Points : 1)        Materials used in the production of goods to be sold.
       Assets intended to be sold in the normal course of business.
       Equipment used in the manufacturing of assets for sale.
       Assets currently in production for normal sales. 1. To determine the value of a LIFO layer, using dollar-value LIFO retail: (Points : 1)        Divide the LIFO layer by the layer year price index and multiply by the layer year cost-to-retail percentage.
       Multiply the LIFO layer by the base year price index and the current year cost-to-retail percentage.
       Multiply the LIFO layer by the layer year price index and by the layer year cost-to-retail percentage.
       Divide the LIFO layer by the layer year cost-to-retail percentage and multiply by the layer year price index.

Explanation / Answer

1. To determine the value of a LIFO layer, using dollar-value LIFO retail - Multiply the LIFO layer by the layer year price index and by the layer year cost-to-retail percentage.

2. To determine if an increase in the dollar value of inventory is due to increased quantities, using dollar-value LIFO retail - Deflate the ending inventory amount to beginning of year prices and compare to the beginning inventory amount.

3. 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,==

COGS = sales – gross profit

= 1300000- 520000= 780000

Inventory at end = inventory at beginning + purchase – COGS

= 300000 + 875000 – 780000

= 395000

4. Using the dollar-value LIFO retail method for inventory= All of the above are correct.

5. Under the gross method, purchase discounts taken are Deducted from purchases

6. 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 - Weighted average.

7. Cost of goods sold is given by: Net Purchases + beginning inventory - ending inventory

8. An argument against the use of LCM is its lack of Relevance.

9. The primary reason for the popularity of LIFO is that it gives: Better matching of physical flow and cost flow.

10. Inventory does not include: Equipment used in the manufacturing of assets for sale

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