The Inventory Account of Lance Company at December 31, 2007

question 87

Multiple Choice

The inventory account of Lance Company at December 31, 2007, included the following items: $\begin{array} { l } &\text { Inventory Amount}\\ \text { Merchandise out on consignment at sales price}&\\ \text {(including markup of \( 40 \% \) on selling price) }&\$15,000\\ \text {Goods purchased, in transit (shipped f.o.b. shipping point) }&12,000\\ \text { Goods held on consignment by Lance}&13,000\\ \text {Goods out on approval (sales price \( \$ 7,600 \) , cost \( \$ 6,400 \) ) }&7,600\\\end{array}$
Based on the above information, the inventory account at December 31, 2007, should be reduced by

• A)$20,200.
• B)$22,600.
• C)$32,200.
• D)$32,000.

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Definitions:

Required Return

The smallest yearly percentage gain from an investment necessary to entice people or corporations to invest in a certain security or endeavor.

Risk Aversion

The tendency of investors to prefer lower risk or safer investments to avoid potential losses.

Portfolio Beta

A measure of a portfolio's volatility in relation to the market as a whole; it indicates the sensitivity of the portfolio's returns to market movements.

SML Shifts

Changes in the Security Market Line, a graphical representation of the Capital Asset Pricing Model (CAPM) that shows different levels of systematic, or market, risk versus return for the whole market.