18. The Groupo Co. uses the retail method to compute its ending inventory. Gener
ID: 2489404 • Letter: 1
Question
18.
The Groupo Co. uses the retail method to compute its ending inventory.
General Ledger balances on 12/31/10 before calculating ending inventory:
Merchandise Inventory
Purchases
Sales
1/1/10
20,000
80,000
110,000
Beginning inventory at retail = $35,000
Purchases at retail = $125,000
Based on the information above. What is the ending inventory at retail?
A. 10000
B. 45000
C. 50000
D. 160000
19.
The Groupo Co. uses the retail method to compute its ending inventory.
General Ledger balances on 12/31/10 before calculating ending inventory:
Merchandise Inventory
Purchases
Sales
1/1/10
20,000
80,000
110,000
Beginning inventory at retail = $35,000
Purchases at retail = $125,000
Calculate the cost to retail ratio based on the above. Choose the closest answer.
A. 64.0%
B. 64.5%
C. 62.5%
D. MORE THAN 68%
20. The Stevens Co. has suffered losses in its film developing division for the last two years. On 12/31/10, the controller decided that he would need to apply the impairment test to film developing equipment and make any required adjustments. He gathered the following information and determined that the asset was impaired:
Balance in the Equipment account = $400,000
Balance in Accumulated Depreciation = $300,000
Future value of cash flows associated with the asset = $75,000
Fair value of asset on 12/31/10 = $60,000.
Why is the asset considered to be "impaired?"
A. Cost of equipment ($400,000) exceeds future cash flows ($75,000)
B. Book value of the equipment ($100,000) exceeds future cash flows ($75,000)
C. Book value of the equipment $100,000) exceeds fair value ($60,000)
D. Fair value of asset ($60,000) is less than future cash flows ($75,000)
Merchandise Inventory
Purchases
Sales
1/1/10
20,000
80,000
110,000
Explanation / Answer
Solution.
Q18.
i. calculation of retail value of goos avilable for sale = $35,000 + $125,000
= $160,000
ii. Subtraction of total sales during the period from the retail value of goods available for sale.
$160,000 - $110,000 = $50,000
iii. Calculation of the cost to retail price ratio
Where,
A is the cost of beginning inventory;
B is the cost of inventory purchased including incidental costs such as freight-in;
C is the retail value of beginning inventory; and
D is the retail value of goods purchased during the period
Cost to Retail Ratio = ($20,000 + $80,000 / $35,000 + $125,000)
= $100,000 / $160,000
= .625
iv. $50,000 x .625 = $31.250.
Q19. Calculation of the cost to retail ratio based on the above
Beginning inventory at retail = $35,000
Purchases at retail = $125,000
Total = $160,000
Beginning inventory at cost = $20,000
Purchases at cost = $80,000
Total = $100,000
cost to retail ratio = $100,000 / $160,000
= 62.5%
Q20.
Answer is D. Fair value of asset ($60,000) is less than future cash flows ($75,000)
Because if asset is able to genrate futuree cash inflow $75,000, and there fair value is yet $60,000 it show asset is
"impaired".
Cost to Retail Ratio = A+ B C + DRelated Questions
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