Question Details

Which of the following is not a reason the retail inventory method is used widely 



1.	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 net realizable value.
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.

	2.	To produce an inventory valuation which approximates the lower-of-cost-or-net realizable value 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.

	3.	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.

4.	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

	5.	What condition is not necessary in order to use the retail method to provide inventory results?
a.	Retailer keeps a record of the total costs of products sold for the period.
b.	Retailer keeps a record of the total costs and retail value of goods purchased.
c.	Retailer keeps a record of the total costs and retail value of goods available for sale.
d.	Retailer keeps a record of sales for the period.



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