13Why might inventory be reponed at sales prices (net realisable value of market
ID: 2594993 • Letter: 1
Question
13Why might inventory be reponed at sales prices (net realisable value of market price) rather than cost? AY When a non-Cancellable contract exists to sell the inventory. B) When there is a controlled market with a quoted price applicable to all quantities and when there are no significant costs of disposal. When there is a controlled market with a quoted price applicable to all quantities. When there are no significant costs of disposal. C) 36. Which of the following transactions would require the use of the present value of an annuity due concept in order to calculate the present value of the asset obtained or liability owed at the date of incurrenos? A). A capital lease is entered into with the initial lease paytnerit due one month subse- quent to the signing of the lease agreement. B) A ten-year 8% bond is issued on January 2 with interest payable semianinally on 9 July 1 and January 1 yielding 9%. (CY A capital leasc is entered into with the initial lease payment due upon the signing of the Icasc agreement. D) A ten-year 8% bond is issued on January 2 with interest payable semianrwually onm. July 1 and January 1 yielding 7%. 37. Which of the following items should be included in a company's inventory at the balance sheet date? A) Goods received from another company for sale on consignment. B) Goods sold to a customer which are being held for the customer to call for at his or her convenience. Goods in transit which were purchased f.o.b. destination. D) None of these answer choices are correct. 38. Turner Corporation acquired two inventory items at a lump-sum cost of '$120,000. The acquisition included 3,000 units of product LF, and 7,000 units of product 1B. IF normally sells for 530 per unit, and iB for $10 per unit. If Turner selts 1,000 units of LF, what amount of gross profit should it recognize? A) $7,500. B) $20,000. c) $24,500, D) $2,500Explanation / Answer
Soluton 35:
Inventory be reported at sale price when there is controlled market with quoted price applicable to all quantities and when there are not significant cost of disposal.
Solution 36:
A captial lease entered into with the initial lease payment due upon signing of the lease agreement requries the use of present value of annuity due concept in order to calculate the present value of asset obtained.
Solution 37:
Goods in transit which wer purchase on FOB destination will be included in compay's inventory at balance sheet date as ownership on these goods transfered to the company.
Good received from another company for sale on consignment will not be the part of inventory as ownership does not lying with the company.
Goods sold to customer which are being held for the customer to call for at his or her convenience will not be the part of inventory as ownership is already transferred to the customer.
Solution 38:
Total lump sum cost of two inventory = $120,000
Estimated sales value for inventory purchased = (3000*30) + (7000*10) = $160,000
Estimated Gross Profit = $160,000 - $120,000 = $40,000
Gross profit margin = $40,000/$160,000 = 25% on Sales
If Turne sells 1000 units of LF then amount of gross profit to be recoginzed = 1000*30*25% = $7,500
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