Question

1. Data related to the inventories of Costco Medical Supply are presented below:

	Surgical Equipment				Surgical Supplies				Rehab Equipment				Rehab Supplies
Selling price	$	260			$	137			$	333			$	151
Cost		167				108				280				144
Costs to sell		12				9				16				14

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

Multiple Choice

• $267.

• $280.

• $317.

• $234.

2. Data below for the year ended December 31, 2021, relates to Houdini Inc. Houdini started business January 1, 2021, and uses the LIFO retail method to estimate ending inventory.

	Cost			Retail
Beginning inventory	$	90,000		$	105,000
Net purchases		416,440			600,000
Net markups					38,000
Net markdowns					58,000
Net sales					537,000

Current period cost-to-retail percentage is:

Multiple Choice

• 73.9%.

• 85.7%.

• 65.3%.

• 71.8%.

Answer 1

1

Net realizable value = Sales price-Cost to sell

Net realizable value Rehab Equipment = 333-16 = $317

Lower of Cost or Net realizable value for Rehab Equipment is Cost i.e. $280

Option B $280 is correct

2
	Cost	Retail
Net purchases	416440	600000
Add: Net markups		38000
Less: Net markdowns		(58000)
Goods available for sale	416440	580000
Current period cost-to-retail percentage	71.8%	=416440/580000
Option D 71.8% is correct