inventory method which is designed to approximate 17. inventory valuation at the

Question

inventory method which is designed to approximate 17. inventory valuation at the lower of cost or market is A) last-in, first-out. B) first-in, first-out. C) conventional retail method. D) specific identification. 18. To produce an inventory valuation which approximates the lower of cost or market using the conventional retail inventory method, the computation of the ratio of cost to retail should A) include markups but not markdowns. B) include markups and markdowns. C) ignore both markups and markdowns. D) include markdowns but not markups. 19. The following information is available for October for Norton Company. Beginning inventory S400,000 Net purchases Net sales Percentage markup on 66.67% cost A fire destroyed Norton's October 31 inventory, leaving undamaged inventory with a cost of $24,000. Using the gross profit method, the estimated ending inventory destroyed by fire is A) $136,000. B) $616,000. C) $640,000. D) $800,000. 1,200,000 2,400,000 Page 8

Explanation / Answer

17- conventional retail method - it is used to value the inventory at lower of cost or market value

18-include markups but not markdowns because this tends to give a better approximation of the lower of cost or market.

19-  (400,000 + 1200,000) – (2400000 ÷ 1.667) – 24000 = $34,000.

1600000-(1440000)-24000 = 136000

Answer is A

19-

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