ACC 620 Test 1 Take Home 10-2010

ACC 620 Test 1 Take Home 10-2010 -...

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ACC 620: Financial Reporting II NAME: Chapters 9, 10 and 11 Take Home Caruso – October 2010 Page 1 Multiple Choice: This is a take-home test since most classes are not meeting on Columbus Day Monday. For questions that require computations, please show your work for partial credit. 1. Which method(s) may be used to record a loss due to a price decline in the value of inventory? A) Allowance method. B) Sales method C) Direct method D) Both a and c 2. Recording inventory at net realizable value is permitted, even if it is above cost, when there are no significant costs of disposal involved and A) the ending inventory is determined by a physical inventory count. B) a normal profit is not anticipated. C) there is a controlled market with a quoted price applicable to all quantities. D) the internal revenue service is assured that the practice is not used only to distort reported net income. 3. In 2010, Orear Manufacturing signed a contract with a supplier to purchase raw materials in 2011 for $700,000. Before the December 31, 2010 balance sheet date, the market price for these materials dropped to $510,000. The journal entry to record this situation at December 31, 2010 will result in a credit that should be reported A) as a valuation account to Inventory on the balance sheet. B) as a current liability. C) as an appropriation of retained earnings. D) on the income statement. 4. When using dollar-value LIFO, if the incremental layer was added last year, it should be multiplied by A) last year's cost ratio and this year's index. B) this year's cost ratio and this year's index. C) last year's cost ratio and last year's index. D) this year's cost ratio and last year's index. 5. 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 for each product. Specific data with respect to each product follows: Product #1 Product #2 Historical cost $40.00 $ 70.00 Replacement cost 45.00 54.00 Estimated cost to dispose 10.00 26.00 Estimated selling price 80.00 130.00 In pricing its ending inventory using the lower-of-cost-or-market, what unit values should Oslo use for products #1 and #2, respectively? A) $40.00 and $65.00. B) $46.00 and $65.00 C) $46.00 and $60.00. D) $45.00 and $54.00
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ACC 620: Financial Reporting II NAME: Chapters 9, 10 and 11 Take Home Caruso – October 2010 Page 2 6. Turner Corporation acquired two inventory items at a lump-sum cost of $50,000. The acquisition included 3,000 units of product LF, and 7,000 units of product 1B. LF normally sells for $15 per unit, and 1B for $5 per unit. If Turner sells 1,000 units of LF, what amount of gross profit should it recognize? A)
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ACC 620 Test 1 Take Home 10-2010 -...

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