Question : 15.4   Learning Objective 15-4 1) A method that uses average gross : 1171065

 

15.4   Learning Objective 15-4

1) A method that uses average gross profit rate and net sales to compute inventory is:

A) the retail method.

B) the gross profit method.

C) the weighted-average method.

D) None of these answers is correct.

2) Hard Candy has a beginning inventory of $2,000. June purchases were $6,000, and retail sales were $3,000. The store has a normal gross profit of 50%. What is the June 30 estimated ending inventory at cost under the gross profit method?

A) $6,100

B) $6,500

C) $6,700

D) $6,000

3) Hard Candy has a beginning inventory of $1,000 with a retail value of $1,800. June purchases were $3,000, with a retail value of $4,700 and retail sales were $4,200. Use four decimal places. What is the June 30 estimated ending inventory at cost under the retail method?

A) $351

B) $949

C) $4,161

D) $1,416.42

4) St. Paul Corporation has a normal gross profit of 35%. The current year’s beginning inventory was $3,500, purchases were $10,000, and retail sales were $16,000. The estimated ending inventory under the gross profit method is:

A) $3,150.

B) $3,250.

C) $3,100.

D) $3,500.

5) St. Paul Corporation had a beginning inventory of $2,500 which would retail for $4,000. They made $9,000 in purchases which would retail at $14,400. The sales for the period were $15,000. What is the estimated cost of ending inventory under the retail inventory method?

A) $1,500

B) $3,400

C) $4,000

D) $2,125

6) Bright Garden Center had the following data for May:

 

 

Cost Price

Retail Price

Beginning inventory

$2,000

$3,600

Purchases

3,000

4,400

Sales

 

4,500

 

Use four decimal places. The cost of the estimated inventory on May 31 under the retail method is:

A) $3,500.00.

B) $2,871.50

C) $2,187.50

D) $500.00

7) Use four decimal places. Chocolate Heaven had the following data for November:

 

 

Cost Price

Retail Price

Beginning inventory

$8,000

$13,000

Purchases

18,000

25,000

Sales

 

30,000

 

The cost of the estimated inventory on November 30 under the retail method is:

A) $5,440.

B) $2,560.

C) $8,160.

D) $3,840.

8) Compute the cost of ending inventory using the retail method when goods available for sale at cost are $15,000, retail is $25,000, and sales at retail equal $20,000. What will the cost ratio be? What will the cost of ending inventory be?

A) Cost ratio 60%; ending inventory $5,000

B) Cost ratio 75%; ending inventory $10,000

C) Cost ratio 70%; ending inventory $12,000

D) Cost ratio 60%; ending inventory $3,000

9) An understatement of ending inventory in one period results in:

A) an overstatement of net income for the next period.

B) no effect on net income for the next period.

C) an overstatement of the ending inventory for the next period.

D) an understatement of net income for the next period.

10) As a result of overstating ending inventory by $10,000 at the end of Year 1:

A) net income for Year 2 will be understated.

B) net income for Year 2 will be overstated.

C) ending inventory for Year 2 will be overstated.

D) There will be no effect on net income for Year 2.