Question

Circle the letter of the best answer. FCompany had January I inventory of $300,000 when it adopted dollar-va LIFO. During the year, pu Decemb . ngineyear, purchases were SIS00,000 and sales were S,OK,000. $430,080, and the price index was 112. 31 inventory at year-end prices was What is RF Company's ending inventory at dollar-value LIFO? b. $384,000. c. $394.080. d $430,080 Ans. a. $300,000. entory is best described as the 0 Lower of cost or net realizable value as it applies to inv Ans. a. drop of future utility below its original cost. b. method of determining cost of goods sold. c. assumption to determine inventory flow dchange in inventory value to market value .When valuing raw materials inventory at lower-of-cost-or-market, what is the Ans. a. Net realizable value meaning of the term "market"? b. Net realizable value less a normal profit margin c. Replacement cost, Net realizable value, or Net realizable value less a normal profit margnnted present value 52. The designated market value Ans. ais always the middle value of replacement cost, net realizable value, and net realizable value less a normal profit margin. b. should always be equal to net realizable value. c. may sometimes exceed net realizable value. d. should always be equal to net realizable value less a normal profit margin 53. If a material amount of inventory has been ordered through a formal purchase contract at the balance sheet date for future delivery at firm prices Ans. a. this fact must be disclosed. disclosure is required only if prices have declined since the date of the order. b. c. disclosure is required only if prices have since risen substantially d. an appropriation of retained earnings is necessary Oslo Corporation has two products in its ending inventory, each accounted for at the lower of cost or market. A profit margin of 30% on selling price is considered normal S4. for each product. Specific data with respect to each product follows: Product #1 Product #2 Historical cost Replacement cost Estimated cost to dispose Estimated selling price $10 S 18 14 20 In pricing its ending inventory using the lower-of-cost-or-market, what unit values, rounded to the nearest dollar, should Oslo use for products #1 and #2, respectively? Ans. a. $10 and $16 b. $13 and $16. c. $13 and $15 d. $11 and $14. Page 11 of 12

Answer 1

49. Option C

Ending Inventory = (($430080 ÷ 1.12) -$300000)

Ending Inventory = $384000 – $300000 = $84000.

Ending Inventory = $300000 + ($84000 × 1.12) = $394080

.50. Option A. drop of future utility below its original cost.

51. Option C. replacement cost, NRV or NRV less normal profit

52. Option A. The designated market value is always between is always the middle value of replacement cost, net realizable value, and net realizable value less a normal profit margin.

53. Option A. this fact must be disclosed. in Balance sheet

54. Option A.

Product 1:   RC = $11, NRV = $20 – $3 = $17

NRV – PM = $17 – ($20 × 0.30) = $11, cost = $10.

Product 2:   RC = $14, NRV = $33 – $7 = $27

NRV – PM = $26 – ($33 × 0.30) = $16, cost = $18.

Thus Cost of Product 2 is $16