Exam 1 - Answers

Exam 1 Answers - ACC372 INTERMEDIATE ACCOUNTING II(3 HOURS INSTRUCTOR LIN ZHENG EXAM 1 Name PART I MULTIPLE CHOICE QUESTIONS CHOOSE THE BEST

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ACC372 - INTERMEDIATE ACCOUNTING II (3 HOURS) INSTRUCTOR: LIN ZHENG EXAM 1 Name: __________________________ PART I: MULTIPLE CHOICE QUESTIONS. CHOOSE THE BEST ANSWERS FOR EACH QUESTION. PROVIDE ANSWERS AFTER PART I. 2 POINTS EACH. Chapter 9 70. Lexington Company sells product 1976NLC for $40 per unit. The cost of one unit of 1976NLC is $36, and the replacement cost is $34. The estimated cost to dispose of a unit is $8, and the normal profit is 40%. At what amount per unit should product 1976NLC be reported, applying lower-of-cost-or-market? a. $16. b. $32. c. $34. d. $36. 70. b NRV = $40 – $8 = $32, RC = $34 NRV – PM = $32 – ($40 × .40) = $16, cost = $36. 87. Confectioners, a chain of candy stores, purchases its candy in bulk from its suppliers. For a recent shipment, the company paid $3,000 and received 8,500 pieces of candy that are allocated among three groups. Group 1 consists of 2,500 pieces that are expected to sell for $0.25 each. Group 2 consists of 5,500 pieces that are expected to sell for 0.60 each. Group 3 consists of 500 pieces that are expected to sell for $1.20 each. Using the relative sales value method, what is the cost per item in group 2? a. $0.375. b. $0.600. c. $0.350. d. $.0398. 87. d (2,500 × $0.25) + (5,500 × $0.60) + (500 × $1.20) = $4,525; [(5,500 × $0.60) ÷ $4,525] × $3,000 = $2,188 ÷ 5,500 = $0.398. 103. On April 15 of the current year, a fire destroyed the entire uninsured inventory of a retail store. The following data are available: Sales, January 1 through April 15 $300,000 Inventory, January 1 50,000 Purchases, January 1 through April 15 250,000 Markup on cost 25% The amount of the inventory loss is estimated to be a. $60,000. b. $30,000. c. $75,000. 1
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d. $50,000. $300,000 103. a $50,000 + $250,000 – ————— = $60,000. 1.25 122. East Corporation’s computation of cost of goods sold is: Beginning inventory $ 60,000 Add: Cost of goods purchased 405,000 Cost of goods available for sale 465,000 Ending inventory 80,000 Cost of goods sold $385,000 The average days to sell inventory for East are a. 56.9 days. b. 63.1 days. c. 66.4 days. d. 75.8 days. 122. c $385,000 ÷ [($60,000 + $80,000) ÷ 2] = 5.5; 365 ÷ 5.5 = 66.4. 99. A markup of 40% on cost is equivalent to what markup on selling price? a. 29% b. 40% c. 60% d. 71% 99. a .40 2.9 29% 1 .40 = = + 25. Designated market value a. is 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. a 39. If a unit of inventory has declined in value below original cost, but the market value exceeds net realizable value, the amount to be used for purposes of inventory valuation is a. net realizable value. b.
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This note was uploaded on 05/04/2011 for the course ACC 371 taught by Professor Zheng during the Spring '11 term at Mercer.

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Exam 1 Answers - ACC372 INTERMEDIATE ACCOUNTING II(3 HOURS INSTRUCTOR LIN ZHENG EXAM 1 Name PART I MULTIPLE CHOICE QUESTIONS CHOOSE THE BEST

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