Question :
111.Gross profit rate equal to:
A. Net sales divided by gross profit.
B. Gross : 1237666
111.Gross profit rate is equal to:
A. Net sales divided by gross profit.
B. Gross sales divided by gross profit.
C. Gross profit divided by net sales.
D. Gross profit divided by gross sales.
112.Which of the following inventory valuation methods is only an estimate of actual costs?
A. Only the retail method.
B. Only the gross profit method.
C. Both retail and gross profit methods are only estimations.
D. Neither the retail nor the gross profit methods are estimations.
113.Companies with periodic inventory systems often use techniques such as the gross profit method and the retail method to:
A. Prepare interim financial statements without taking a complete physical inventory.
B. Increase gross profit.
C. Value inventory at its sales price instead of its cost.
D. Reduce taxable income during a period of rising prices.
114.The gross profit method of valuing inventory:
A. Is the most accurate of the commonly used methods.
B. Is a satisfactory substitute for taking a physical inventory for annual financial statements.
C. Assumes that the gross profit rate will remain the same for the current year as it has in the past year or so.
D. Is not an acceptable method under GAAP.
115.For the last several years Conway Corporation has operated with a gross profit rate of 40%. On January 1 of the current year, the company had on hand inventory with a cost of $600,000. Purchases of merchandise during January amounted to $150,000, and sales for the month were $360,000. Using the gross profit method, what is the estimated inventory at January 31?
A. $144,000.
B. $216,000.
C. $360,000.
D. $534,000.
($600,000 + $150,000) – ((100% – 40%) × $360,000) = $534,000
116.During the month of January, Sundown Corporation had sales of $300,000 and a cost of goods available for sale of $600,000. The company consistently earns a gross profit rate of 45%. Using the gross profit method, the estimated inventory at January 31 amounts to:
A. $135,000.
B. $435,000.
C. $165,000.
D. $465,000.
$600,000 – ($300,000 × (100% – 45%)) = $435,000
117.Colonial uses the retail method to estimate its monthly cost of goods sold and month-end inventory. At August 31, the accounting records indicate the cost of goods available for sale during the month (beginning inventory plus purchases) totaled $270,000. These goods had been priced for resale at $675,000. Sales in August totaled $450,000. The estimated inventory at August 31 is:
A. $48,000.
B. $90,000.
C. $120,000.
D. $270,000.
($675,000 – $450,000) × ($270,000/$675,000) = $90,000
118.Garden World uses the retail method to estimate its monthly cost of goods sold and month-end inventory. At May 31, the accounting records indicate the cost of goods available for sale during the month (beginning inventory plus purchases) totaled $540,000. These goods had been priced for resale at $900,000. Sales in May totaled $480,000. The estimated inventory at May 31 is:
A. $540,000.
B. $252,000.
C. $420,000.
D. $288,000.
($900,000 – $480,000) × ($540,000/$900,000) = $252,000
Midwest Office Products uses the retail method to estimate ending inventory in its monthly financial statements. The following information is available for the month ended May 31:
119.Refer to the information above. Determine the cost ratio that should be used in estimating the May 31 inventory using the retail method. (Round your final answer percentage to one decimal point)
A. 63.8%.
B. 69.4%.
C. 66.0%.
D. 68.4%.
($322,200/$471,000) * 100 = 68.4%
120.Refer to the information above. Estimate the cost of the May 31 inventory using the retail method.
A. $116,964.
B. $137,400.
C. $150,425.
D. $204,000.
($471,000 – $300,000) × 68.4% = $116,964
