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14. A disadvantage of the gross profit method is that it uses past
percentages in determining the markup.
15. When the conventional retail method includes both net
markups and net markdowns in the cost-to-retail ratio, it
approximates a lower-of-cost-or-market valuation.
16. In the retail inventory method, the term markup means a
markup on the original cost of an inventory item.
17. In the retail inventory method, abnormal shortages are
deducted from both the cost and retail amounts and reported as a
loss.
18. The inventory turnover ratio is computed by dividing the cost
of goods sold by the ending inventory on hand.
19. The average days to sell inventory represents the average
number of days’ sales for which a company has inventory on hand.
*20. The LIFO retail method assumes that markups and
markdowns apply only to the goods purchased during the period.
True False Answers—Conceptual
MULTIPLE CHOICE—Conceptual
21.
Which of the following is true about lower-of-cost-or-market?
a. It is inconsistent because losses are recognized but not gains.
b. It usually understates assets.
c. It can increase future income.