Questions -

Q1. Lin Co. sells its merchandise at a gross profit of 30%. The following figures are among those pertaining to Lin's operations for the 6 months ended June 30, 2005:

Sales $200,000

Beginning inventory 50,000

Purchases 130,000

On June 30, 2005, all of Lin's inventory was destroyed by fire. The estimated cost of this destroyed inventory was

A. $120,000

B. $70,000

C. $40,000

D. $20,000

Q2. On December 31, 2004, Kern Company adopted the dollar-value LIFO inventory method. All of Kern's inventories constitute a single pool. The inventory on December 31, 2004, using the dollar-value LIFO inventory method was $600,000. Inventory data for 2005 are as follows:

2/31/05 inventory at year-end prices $780,000

Relevant price index at year-end (base year 2004) 120

Under the dollar-value LIFO inventory method, Kern's inventory at December 31, 2005, would be

A. $650,000

B. $655,000

C. $660,000

D. $720,000

Q3. Caravan Corporation owned a warehouse located in the path of a proposed highway. Caravan bought the land in 1962 for $10,000. That same year, it built the warehouse at a cost of $50,000. In 2005, after prolonged litigation, the state exercised its right of eminent domain and condemned the property, awarding Caravan $200,000. Depreciation accumulated to the date of the award was $45,000. On its 2005 federal income tax return, Caravan elected not to recognize the gain since replacement property was bought for $225,000. For income statement purposes, Caravan should recognize a gain in 2005 of

A. 0

B. $160,000

C. $185,000

D. $200,000

Q4. 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 $700,000

Inventory January 1 $130,000

Purchases, January 1 through July 8 $640,000

Gross profit ratio 30%

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

A. $192,000

B. $490,000

C. $510,000

D. $280,000

Q5. Cloverdale, Inc. uses the conventional retail inventory method to account for inventory. The following information relates to current 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. $273,600.

B. $272,861.

C. $275,000.

D. None of the above.