Question

6. California Inc., through no fault of its own, lost an entire plant due to an earthquake on May 1, 2018. In preparing its insurance claim on the inventory loss, the company developed the following data: Inventory January 1, 2018, $400,000; sales and purchases from January 1, 2018, to May 1, 2018, $1,240,000 and $895,000, respectively. California consistently reports a 40% gross profit. The estimated inventory on May 1, 2018, is:

a. $516,000.

b. $611,000.

c. $552,600.

d.$551,000.

7.Fad City sells novel clothes that are subject to a great deal of price volatility. A recent item that cost $21.80 was marked up $12.20, marked down for a sale by $6.80 and then had a markdown cancellation of $3.60. The latest selling price is:

a. $30.80.

b. $37.60.

c. $32.40.

d. $28.60.

8. Data below for the year ended December 31, 2018, relates to Houdini Inc. Houdini started business January 1, 2018, and uses the LIFO retail method to estimate ending inventory.

	Cost			Retail
Beginning inventory	$	80,000		$	121,000
Net purchases		377,890			550,000
Net markups					33,000
Net markdowns					53,000
Net sales					492,000

Current period cost-to-retail percentage is:

Multiple Choice

a. 71.3%.

b. 70.3%.

c. 64.8%.

d. 66.1%.

9. Data below for the year ended December 31, 2018, relates to Houdini Inc. Houdini started business January 1, 2018, and uses the LIFO retail method to estimate ending inventory.

   

	Cost			Retail
Beginning inventory	$	76,000		$	115,000
Net purchases		362,610			530,000
Net markups					31,000
Net markdowns					51,000
Net sales					474,000

     
Estimated ending inventory at retail is:

Multiple Choice

a. $151,000.

b. $36,000.

c. $87,000.

d. $200,770.

10. Data below for the year ended December 31, 2018, relates to Houdini Inc. Houdini started business January 1, 2018, and uses the LIFO retail method to estimate ending inventory.

	Cost			Retail
Beginning inventory	$	70,000		$	107,000
Net purchases		302,290			450,000
Net markups					23,000
Net markdowns					43,000
Net sales					402,000

  
Estimated ending inventory at cost is: (Do not round intermediate calculations):

Multiple Choice

a. $94,329.

b. $89,684.

c. $97,180.

Answer 1