1. Mario Brothers Company adopted the dollar-value LIFO inventory method on January 1, 2015. In applying the LIFO method, Mario Brothers uses internal cost indexes and the multiple-pools approach. The following data were available for Inventory Pool No. 3 for the two years following the adoption of LIFO:
Ending Inventory
At Cu
ent
At Base
Yea
Cost
Year Cost
Cost Index
1/1/2015
$300,000
$300,000
1.00
12/31/2015
345,600
320,000
1.08
12/31/2016
420,000
350,000
1.20
Under the dollar-value LIFO method, the inventory at December 31, 2016, should be:
A. $357,600.
B. $350,000.
C. $351,600.
D. $600,120.
2. When using the gross profit method to estimate ending inventory, it's not necessary to know
A. cost of goods sold.
B. beginning inventory.
C. net sales.
D. net purchases.
3. On January 1, 2015, Fe
et, Inc., adopted the dollar-value LIFO method. The inventory cost on this date was $100,000. The 2015 ending inventory, valued at year-end costs, was $126,000. The relative cost index for this inventory in 2015 was 1.05. Suppose that Fe
et's 2016 ending inventory, valued at year-end costs, was $143,000 and that the relative cost index for this inventory in 2016 was 1.10. Also suppose that Fe
et's 2017 ending inventory, valued at year-end costs, was $153,600 and that the relative cost index for this inventory in 2017 was 1.20. What inventory balance would Fe
et report on its 12/31/17 balance sheet?
A. $153,600
B. $128,900
C. $128,000
D. $129,800
4. On April 1 of the cu
ent year, Twin Peaks Company factored receivables with a ca
ying value of $85,000 for $60,000 in cash from Fenders Lenders. The transfer was made without recourse. On April 1, Twin Peaks would
A. credit factored accounts receivable for $85,000.
B. credit defe
ed interest expense for $25,000.
C. debit discount on liability for $25,000.
D. debit loss on sale of receivables for $25,000.
5. Pi Company reported the following pretax data for its first year of operations.
Net sales
2,800
Cost of goods available for sale
2,500
Operating expenses
880
Effective tax rate
40%
Ending inventories:
If LIFO is elected
820
If FIFO is elected
1,060
What's Pi's net income if it elects LIFO?
A. $288
B. $144
C. $240
D. $480
6. Boeing acquired equipment from the manufacturer on 6/30/15 and gave a noninterest-bearing note in exchange. Boeing is obligated to pay $550,000 on 4/30/16 to satisfy the obligation in full. If Boeing accrued interest of $15,000 on the note in its 2015 year-end financial statements, what would the manufacturer record in its 2015 income statement for this transaction?
A. $550,000 of sales revenue
B. $25,000 of interest revenue
C. $15,000 of interest revenue
D. $15,000 of interest revenue and $525,000 of sales revenue
7. At December 31, 2014, Flossy Co. reported accounts receivable of $216,000 and an allowance for uncollectible accounts of $8,400. During 2015, accounts receivable increased by $22,000, and $7,800 of bad debts were written off. An analysis of Flossy Co.'s December 31, 2015, accounts receivable suggests that the allowance for uncollectible accounts should be 3% of accounts receivable. Bad debt expense for 2015 would be
A. $6,540
B. $600
C. $7,140
D. $7,800
8. Under the dollar-value LIFO retail method, to determine the value of a LIFO layer,
A. divide the LIFO layer by the layer-year cost-to-retail percentage and multiply by the layer-year price index.
B. multiply the LIFO layer by the base year price index and the cu
ent year cost-to-retail percentage.
C. divide the LIFO layer by the layer-year price index and multiply by the layer-year cost-to-retail percentage.
D. multiply the LIFO layer by the layer-year price index and by the layer-year cost-to-retail percentage.
9. Cloverdale, Inc., uses the conventional retail inventory method to account for inventory. The following information relates to cu
ent year's operations:
Cost
Retail
Beginning inventory and purchases
$313,500
$540,000
Net markups
30,000
Net markdowns
20,000
Net sales
480,000
What amount should be reported as cost of goods sold for the year?
A. $275,000.
B. $272,861.
C. $273,600.
D. $325,000.
10. Two Eyed Jack Company had the following cash balance items listed in its trial balance at 12/31/15:
Peterson Savings and Loan:
$50,000
Right Bank:
(5,000)
Clinton County Trust Bank:
10,000
If Two Eyed Jack reports under IFRS, its 12/31/15 balance sheet would show what cash balance?
A. $60,000
B. ($1,000)
C. $55,000
D. ($5,000)
11. Lingua Company reported the following pretax data for its first year of operations.
Net sales
7,340
Cost of goods available for sale
5,790
Operating expenses
1,728
Effective tax rate
40%
Ending inventories:
If LIFO is elected
618
If FIFO is elected
798
What's Lingua's net income if it elects FIFO?
A. $372
B. $264
C. $620
D. $440
12. Alaska Inc., through no fault of its own, lost an entire plant due to an earthquake on May 1, 2015. In preparing their insurance claim on the inventory loss, they developed the following data: Inventory January 1, 2015, $300,000; sales and purchases from January 1, 2015, to May 1, 2015, $1,300,000 and $875,000, respectively. Alaska consistently reports a 40% gross profit. The estimated inventory on May 1, 2015, is
A. $360,000.
B. $302,500.
C. $395,000.
D. $455,000.
13. Clay and Glaze, Inc., uses LIFO. Clay and Glaze disclosed that if FIFO had been used, inventory at the end of 2015 would have been $15 million higher than the difference between LIFO and FIFO at the end of 2014. Assuming Clay and Glaze has a 40% income tax rate, its reported
A. net income for 2015 would have been $9 million higher if it had used FIFO rather than LIFO for its financial statements.
B. net income for 2015 would have been $15 million higher if it had used FIFO rather than LIFO for its financial statements.
C. cost of goods sold for 2015 would have been $9 million higher if it had used FIFO rather than LIFO for its financial statements.
D. cost of goods sold for 2015 would have been $15 million higher if it had used FIFO rather than LIFO for its financial statements.
14. Bo
y Corporation has determined its year-end inventory on a FIFO basis to be $500,000. Information pertaining to that inventory is as follows:
Selling price
$520,000
Disposal costs
30,000
Normal profit margin
60,000
Replacement cost
440,000
What should be the ca
ying value of Bo
y's inventory?
A. $490,000
B. $440,000
C. $430,000
D. $500,000
15. Pi Company reported the following pretax data for its first year of operations.
Net sales
2,800
Cost of goods available for sale
2,500
Operating expenses
880
Effective tax rate
40%
Ending inventories:
If LIFO is elected
820
If FIFO is elected
1,060
What's Pi's gross profit ratio if it elects LIFO?
A. 40%
B. 5%
C. 80%
D. 49%
16. Data below for the year ended December 31, 2015, relates to Bamboo Inc. Bamboo started business January 1, 2015, and uses the LIFO retail method to estimate ending inventory.
Cost
Retail
Beginning inventory
$66,000
$104,000
Net purchases
280,000
420,000
Net markups
20,000
Net markdowns
40,000
Net sales
375,000
Estimated ending inventory at cost is
A. $91,600.
B. $83,500.
C. $67,650.
D. $90,720.
17. The Do-It-Yourself Hardware began 2015 with a credit balance of $32,000 in the allowance for sales returns account. Sales and cash collections from customers during the year were $650,000 and $610,000, respectively. The Do-It-Yourself estimates that 6% of all sales will be returned. During 2015, customers returned merchandise for credit of $28,000 to their accounts. What's the balance in the allowance for sales returns account at the end of 2015?
A. $11,000
B. $21,000
C. $39,000
D. $43,000
18. Candles and Wicks estimates the allowance for uncollectible accounts at 3% of the ending balance of accounts receivable. During 2015, Candles' credit sales and collections were $125,000 and $131,000, respectively. What was the balance of accounts receivable on January 1, 2015, if $180 in accounts receivable were written off during 2015 and if the allowance account had a balance of $750 on 12/31/15?
A. $5,820
B. $31,180
C. 138,000
D. $31,000
19. Data below for the year ended December 31, 2015, relates to Bamboo Inc. Bamboo started business January 1, 2015, and uses the LIFO retail method to estimate ending inventory.
Cost
Retail
Beginning inventory
$66,000
$104,000
Net purchases
280,000
420,000
Net markups
20,000
Net markdowns
40,000
Net sales
375,000
Estimated ending inventory at retail is
A. $65,000
B. $25,000
C. $129,000
D. $169,600