ACG 3101 Lecture 18: Chapter 9 Notes part 2
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24 Oct 2019
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LeMay Department Store uses the retail inventory method to estimate ending inventory for its monthly financial statements. The following data pertain to one of its largest departments for the month of March 2018:
Cost | Retail | |||
Beginning inventory | $ | 50,000 | $ | 70,000 |
Purchases | 217,000 | 410,000 | ||
Freight-in | 10,986 | |||
Purchase returns | 4,500 | 7,000 | ||
Net markups | 6,800 | |||
Net markdowns | 4,500 | |||
Normal breakage | 7,000 | |||
Net sales | 290,000 | |||
Employee discounts | 2,800 | |||
Sales are recorded net of employee discounts.
1. Compute estimated ending inventory and cost of goods sold for March applying the conventional retail method.
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2. Recompute the cost-to-retail percentage using the average cost method.
Recompute the cost-to-retail percentage using the average cost method. (Round your percentage answer to 2 decimal places (i.e., 0.1234 should be entered as 12.34%).)
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Multiply the LIFO layerby the base year price index and the current year cost-to-retailpercentage. Multiply the LIFO layerby the layer year price index and by the layer year cost-to-retailpercentage. Divide the LIFO layer bythe layer year cost-to-retail percentage and multiply by the layeryear price index. |
Compare beginning andending inventory amounts after adjusting both amounts to theaverage price level for the year. Inflate beginninginventory amount to end of year prices and compare to endinginventory amount. Deflate the endinginventory amount to beginning of year prices and compare to thebeginning inventory amount. |
$360,000. $395,000. $455,000. |
Combines retail LIFOaccounting with dollar-value LIFO accounting Allows companies toreport inventory on the balance sheet at retail prices. All of the above arecorrect. |
Added to netpurchases. Added to interestincome. Deducted frompurchases. |
LIFO. Weighted average. None of the above. |
Beginning inventory +accounts payable - net purchases. Net purchases + endinginventory - beginning inventory. Net Purchases + beginninginventory - ending inventory. |
Reliability. Consistency. Objectivity. |
A deferral of incometax. Simplifiedrecordkeeping. A permanent reduction ofincome taxes. |
Assets intended to besold in the normal course of business. Equipment used in themanufacturing of assets for sale. Assets currently inproduction for normal sales. |