Question

Question 2 Part A and B

A. Data related to the inventories of Alpine Ski Equipment and Supplies is presented below:

	Skis				Boots				Apparel				Supplies
Selling price	$	175,000			$	146,000			$	104,000			$	76,000
Cost		140,000				149,000				72,800				53,200
Replacement cost		118,000				127,000				92,800				49,200
Sales commission		10	%			10	%			10	%			10	%

In applying the lower of cost or net realizable value rule, the inventory of boots would be valued at:

Multiple Choice

• $94,900.

• $131,400.

• $149,000.

• $127,000.

B. On July 8, a fire destroyed the entire merchandise inventory on hand of Larrenaga Wholesale Corporation. The following information is available:

Sales, January 1 through July 8	$	686,000
Inventory, January 1		145,000
Purchases, January 1 through July 8		655,000
Gross profit ratio		24	%

What is the estimated inventory on July 8 immediately prior to the fire?

Multiple Choice

• $157,200.

• $280,640.

• $278,640.

• $521,360.

Answer 1

Question:1

The Answer is $131,400.

Explanation:

	Cost	NRV = Selling Price-Sales Commission	Lower od Cost or NRV
Boots	$        149,000	$                                                            131,400	$                             131,400

Question:2

The Answer is $ 278,640.

Explanation:

Ending Inventory = Beginning Inventory + Purchases - Cost of Merchandise sold

Ending Inventory = 145000 + 655000 - 686000 [100-24]% = 278,640.