1) Which of the following is not relevant to the Gross Margin method of inventory estimation? a

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1) Which of the following is not relevant to the Gross Margin method of inventory estimation?

a. Freight in

b. Sales returns

c. The cost of the goods available for sale in the period

d. Whether the Gross margin has been constant in the period

e. All of the choices are relevant

2) When the retail inventory method is used, markdowns are commonly ignored in the calculation of the cost to retail ratio because:

a. This results in a better approximation of LC&NRV

b. Markups are also ignored so it is a consistent approach

c. This results in showing a normal profit margin

d. There may not be any markdowns

3) On December 19, 2020 ABC Inc.accepts delivery of inventory which it purchased on credit. As of December 31 , 2020 the transaction was not recorded and the inventory not included in inventory. The effect of this error on the Balance Sheet for the December 31, 2020 year is:

a. Assets and Equity were overstated; Liabilities not affected

b. Liabilities not affected; assets and equity overstated

c. Assets and equity understated; liabilities not affected

d. Assets, Liabilities under stated; Equity not affected

4) If you use the retail inventory method to estimate inventory and the cost ratio is overstated (for example, 70% instead of 60%), the estimated cost of ending inventory would be:

a. Understated

b. None of the choices is correct

c. More than the retail value

d. Overstated

e. Correctly stated

5) On December 31, a company counted its inventory. It mistakenly included items that had previously been received on consignment. What is the impact of this error?

a. Net income and assets are both overstated

b. Income and assets are both understated

c. Inventory, purchases and account payable are understated

d. Inventory, purchases and account payable are overstated