View the step-by-step solution to: Montana Co. has determined its year-end inventory on a FIFO basis

Montana Co. has determined its year-end...
Montana Co. has determined its year-end inventory on a FIFO basis to be $600,000. Information pertaining to that inventory is as follows:

What should be the carrying value of Montana's inventory?



a. $600,000.

b. $520,000.

c. $590,000.

d. $510,000.


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2. (Points: 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


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3. (Points: 2)
Fad City sells novel clothes which are subject to a great deal of price volatility. A recent item which cost $20 was marked up $12, marked down for a sale by $6 and then had a markdown cancellation of $3. The latest selling price is:



a. $14.

b. $26.

c. $29.

d. $35.


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4. (Points: 2)
Lacy's Linen Mart uses the retail method to estimate inventories. Data for the first six months of 2011 include: beginning inventory at cost and retail were $60,000 and $120,000, net purchases at cost and retail were $312,000 and $480,000, and sales during the first six months totaled $490,000. The estimated inventory at June 30, 2011, would be:



a. $68,200.

b. $55,000.

c. $71,500.

d. $63,250.


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5. (Points: 2)
Prunedale Co. uses a periodic inventory system. Beginning inventory on January 1 was understated by $30,000, and its ending inventory on December 31 was understated by $17,000. In addition, a purchase of merchandise costing $20,000 was incorrectly recorded as a $2,000 purchase. None of these errors were discovered until the next year. As a result, Prunedale's cost of goods sold for this year was:



a. Overstated by $31,000.

b. Overstated by $5,000.

c. Understated by $31,000.

d. Understated by $48,000.


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6. (Points: 2)
Retrospective treatment of prior years' financial statements is required when there is a change from:



a. Average cost to FIFO.

b. FIFO to average cost.

c. LIFO to average cost.

d. All of the above.


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7. (Points: 2)
To determine the value of a LIFO layer, using dollar-value LIFO retail:



a. Divide the LIFO layer by the layer-year price index and multiply by the layer-year cost-to-retail percentage.

b. Multiply the LIFO layer by the base year price index and the current year cost-to-retail percentage.

c. Multiply the LIFO layer by the layer-year price index and by the layer-year cost-to-retail percentage.

d. Divide the LIFO layer by the layer-year cost-to-retail percentage and multiply by the layer-year price index.


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8. (Points: 2)
Hawkeye Auto Parts uses the retail method to estimate inventories. Data for the first six months of 2011 include: beginning inventory at cost and retail were $55,000 and $100,000, net purchases at cost and retail were $785,000 and $1,300,000, and sales during the first six months totaled $800,000. The estimated inventory at June 30, 2011, would be:



a. $330,000.

b. $360,000.

c. $362,300.

d. None of the above is correct.


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9. (Points: 2)
In determining the cost-to-retail percentage for the current year:



a. Net markups are included.

b. Net markdowns are excluded.

c. Net sales are included.

d. All of the above are correct.


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10. (Points: 2)
Under the LIFO retail method, which of the following are not included in the denominator of the cost-to-retail conversion percentage?



a. Freight-in

b. Purchase returns

c. Purchases

d. Net markdowns


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