Question 1: The following information pertains to one item of inventory of the D

Question

Question 1: The following information pertains to one item of inventory of the Dodge Company: Per unit Cost Replacement cost Selling price Costs to sel $270 225 292 52 Applying the lower of cost and net realizable value rule, this item should be valued at: A. $225 B. $240 C. $270 D. $292 Question 2: Under the conventional retail method, which of the following are not included in the denominator of the current period cost-to-retail conversion percentage? A. Purchase returns B. Net markups C. Purchases D. Net markdowns

Explanation / Answer

1. Cost = 270

Net realizable value = Selling price - Costs to sell

= 292 - 52 = 240

Lower of Cost and Net realizable value = Lower or 270 and 240

= 240

The answer is B.

2. Beginning inventory, Net purchaes(purchases - purchase retuns), Freight in and Net markups are included in the denominator of the current period cost to retail conversion percentage.

The answer is D.

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