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     41.     An inventory method which is designed to approximate 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.

     42.     The retail inventory method is based on the assumption that the
a.     final inventory and the total of goods available for sale contain the same proportion of high-cost and low-cost ratio goods.
b.     ratio of gross margin to sales is approximately the same each period.
c.     ratio of cost to retail changes at a constant rate.
d.     proportions of markups and markdowns to selling price are the same.

     43.     Which statement is true about the retail inventory method?
a.     It may not be used to estimate inventories for interim statements.
b.     It may not be used to estimate inventories for annual statements.
c.     It may not be used by auditors.
d.     None of these.

     44.     When the conventional retail inventory method is used, markdowns are commonly ignored in the computation of the cost to retail ratio because
a.     there may be no markdowns in a given year.
b.     this tends to give a better approximation of the lower of cost or market.
c.     markups are also ignored.
d.     this tends to result in the showing of a normal profit margin in a period when no markdown goods have been sold.


     45.     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.

     *46.     When calculating the cost ratio for the retail inventory method,
a.     if it is the conventional method, the beginning inventory is included and markdowns are deducted.
b.     if it is the LIFO method, the beginning inventory is excluded and markdowns are deducted.
c.     if it is the LIFO method, the beginning inventory is included and markdowns are not deducted.
d.     if it is the conventional method, the beginning inventory is excluded and markdowns are not deducted.

     S47.     Which of the following is not required when using the retail inventory method?
a.     All inventory items must be categorized according to the retail markup percentage which reflects the item's selling price.
b.     A record of the total cost and retail value of goods purchased.
c.     A record of the total cost and retail value of the goods available for sale.
d.     Total sales for the period.

     S48.     Which of the following is not a reason the retail inventory method is used widely?
a.     As a control measure in determining inventory shortages
b.     For insurance information
c.     To permit the computation of net income without a physical count of inventory
d.     To defer income tax liability

     P49.     Which of the following statements is false regarding an assumption of inventory cost flow?
a.     The cost flow assumption need not correspond to the actual physical flow of goods.
b.     The assumption selected may be changed each accounting period.
c.     The FIFO assumption uses the earliest acquired prices to cost the items sold during a period.
d.     The LIFO assumption uses the earliest acquired prices to cost the items on hand at the end of an accounting period.

     P50.     The average days to sell inventory is computed by dividing
a.     365 days by the inventory turnover ratio.
b.     the inventory turnover ratio by 365 days.
c.     net sales by the inventory turnover ratio.
d.     365 days by cost of goods sold.

     51.     The inventory turnover ratio is computed by dividing the cost of goods sold by
a.     beginning inventory.
b.     ending inventory.
c.     average inventory.
d.     number of days in the year.

     *52.     When using dollar-value LIFO, if the incremental layer was added last year, it should be multiplied by
a.     last year's cost ratio and this year's index.
b.     this year's cost ratio and this year's index.
c.     last year's cost ratio and last year's index.
d.     this year's cost ratio and last year's index.

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