Question 1

AASB 102 requires that inventory is valued at:

Accepted Answer

A)  The lower of cost and recoverable value, on an item-by-item basis where practicable. 
B)  Cost or fair value for classes of assets and services that are defined as inventories. 
C)  The lower of cost and net realisable value, on an item-by-item basis where practicable. 
D)  Cost or deprival value, whichever is the lower, for classes of inventories. 
E)  None of the given answers. 
A)  The lower of cost and recoverable value, on an item-by-item basis where practicable. 
B)  Cost or fair value for classes of assets and services that are defined as inventories. 
C)  The lower of cost and net realisable value, on an item-by-item basis where practicable. 
D)  Cost or deprival value, whichever is the lower, for classes of inventories. 
E)  None of the given answers. C

Question 2

AASB 102 requires that fixed manufacturing costs be excluded from the cost of inventories, as they cannot be allocated accurately:

Accepted Answer

A) True 
 B)False  False

Question 3

The periodic inventory system operates by:

Accepted Answer

A)  Keeping track of inventory as it comes into the organisation and as it leaves. 
B)  Counting inventory at regular intervals to establish how much of each item is on hand. 
C)  Assuming that the inventory that came in first is the first to be sold. 
D)  Tracking the cost of specific items of inventory to the products sold by grouping items according to cost drivers. 
E)  None of the given answers. 
A)  Keeping track of inventory as it comes into the organisation and as it leaves. 
B)  Counting inventory at regular intervals to establish how much of each item is on hand. 
C)  Assuming that the inventory that came in first is the first to be sold. 
D)  Tracking the cost of specific items of inventory to the products sold by grouping items according to cost drivers. 
E)  None of the given answers. B

Question 4

Balmoral Ltd commenced business on 1 July 2003. The company manufactures bookcases. Summary data for Balmoral's first full year of operations are:
 
Packaging and delivery are essential to be able to sell the product. What total value should be attributed to finished goods inventory in the financial statements in accordance with AASB 102?

Accepted Answer

A)  $58,950 
B)  $63,000 
C)  $49,500 
D)  $69,660 
E)  None of the given answers. 
A)  $58,950 
B)  $63,000 
C)  $49,500 
D)  $69,660 
E)  None of the given answers.

Question 5

According to AASB 102 inventories include assets:

Accepted Answer

A)  Such as service contracts arising under construction contracts. 
B)  Such as assets held long-term for use in the production process. 
C)  Such as financial instruments. 
D)  Held in the process of production, preparation or conversion for sale. 
E)  None of the given answers. 
A)  Such as service contracts arising under construction contracts. 
B)  Such as assets held long-term for use in the production process. 
C)  Such as financial instruments. 
D)  Held in the process of production, preparation or conversion for sale. 
E)  None of the given answers.

Question 6

Toey Ltd has provided the following information about the total production cost and estimates of realisable value of three lines of shoes they produce within the same class of inventory:
 
Packaging and freight are necessary in order to be able to sell the shoes. What is the value of the inventory in accordance with AASB 102?

Accepted Answer

A)  $34,000 
B)  $40,000 
C)  $32,000 
D)  $24,000 
E)  None of the given answers. 
A)  $34,000 
B)  $40,000 
C)  $32,000 
D)  $24,000 
E)  None of the given answers.

Question 7

AASB 102 requires among others disclosure of which information:

Accepted Answer

A)  Accounting policy adopted for measuring inventories. 
B)  Carrying amount of inventories for each classification of inventory appropriate to the entity. 
C)  Amount of any write-down during the period. 
D)  All of the given answers. 
E)  Carrying amount of inventories pledged for liabilities. 
A)  Accounting policy adopted for measuring inventories. 
B)  Carrying amount of inventories for each classification of inventory appropriate to the entity. 
C)  Amount of any write-down during the period. 
D)  All of the given answers. 
E)  Carrying amount of inventories pledged for liabilities.

Question 8

AASB 102 "Inventories" applies to biological assets related to agricultural activity.

Accepted Answer

A) True 
 B)False

Question 9

David Gordon is an accountant for Bronte Ltd. At the end of the year he realised that ending inventory was overstated but the purchases account was recorded correctly. What is the effect of above error in the income statement and balance sheet (inventory) accounts of Bronte Ltd?

Accepted Answer

The answer of David Gordon is an accountant for Bronte...

Question 10

The inventory record of Palm Springs Ltd. shows 1,000 surf boards on stock that cost $50 each. During the last stock take, the accountant noted 100 old style surf boards with net realisable amount of $15. What journal entry would be required of Palm Springs to comply with AASB 102?

Accepted Answer

A)    
B)    
C)    
D)    
E)  E: None of the given answers. 
A)    
B)    
C)    
D)    
E)  E: None of the given answers.

Question 11

In periods where production costs or purchase prices of inventory items do not change, it does not matter which inventory method is adopted as this would generate the same value for cost of goods sold and ending inventory.

Accepted Answer

A) True 
 B)False

Question 12

A company engaged in buying and selling equity securities should consider this asset as inventory and should be accounted for in accordance with AASB 102.

Accepted Answer

A) True 
 B)False

Question 13

Reversal of a previous inventory write down is not advocated in AASB 102.

Accepted Answer

A) True 
 B)False

Question 14

Digitoll Ltd produces a range of computer accessories. One product is a web-cam, a miniature digital camera with the capacity to be linked to a computer. The following are the summary costs for the web-cam for the period ended 31 December 2002:
 
The production level this period was normal at 10,000 units. What is the cost per unit (rounded to the nearest cent) in accordance with AASB 102 requirements?

Accepted Answer

A)  $11.00 
B)  $10.40 
C)  $14.10 
D)  $11.90 
E)  None of the given answers. 
A)  $11.00 
B)  $10.40 
C)  $14.10 
D)  $11.90 
E)  None of the given answers.

Question 15

AASB 102 applies to all inventories including work in progress under construction contracts:

Accepted Answer

A) True 
 B)False

Question 16

Big Games for Big Kids sell a variety of gaming consoles and games. It has presented you with the following information for the sales of a new product, Angel's Hat 2, for the three months from November to January. They began November with 50 units on hand valued at $1,500. In the lead up to Christmas each unit sold for $90 but in the post Christmas sales in January this price was reduced to $50.
 
Big Games for Big Kids use the periodic system to record inventory. A physical stock take reveals 30 units on hand at the end of January. What is the cost of sales and value of ending inventory using the FIFO cost-flow assumption?

Accepted Answer

A)  Cost of sales: $14 190 Ending inventory: $1290 
B)  Cost of sales: $14 060 Ending inventory: $1420 
C)  Cost of sales: $14 060 Ending inventory: $1260 
D)  Cost of sales: $24 850 Ending inventory: $1420 
E)  Cannot be determined from the above information. 
A)  Cost of sales: $14 190 Ending inventory: $1290 
B)  Cost of sales: $14 060 Ending inventory: $1420 
C)  Cost of sales: $14 060 Ending inventory: $1260 
D)  Cost of sales: $24 850 Ending inventory: $1420 
E)  Cannot be determined from the above information.

Question 17

The following information relates to the total production costs and estimates of realisable value for a line of water pistols produced by Splash Happy Co LtD.
 
Packaging and transport costs are necessarily incurred in order to be able to sell the inventory. What is the value of the inventory in accordance with AASB 102?

Accepted Answer

A)  $37,000 
B)  $21,000 
C)  $39,000 
D)  $36,000 
E)  None of the given answers. 
A)  $37,000 
B)  $21,000 
C)  $39,000 
D)  $36,000 
E)  None of the given answers.

Question 18

Handy Ltd produces a line of brooms. The summary cost information for brooms for the year ended 30 June 2002 is:
 
The level of output for the period was the normal level of production of 290,000 units. What is the cost per broom (rounded to the nearest cent) in accordance with AASB 102 requirements?

Accepted Answer

A)  $4.13 
B)  $2.00 
C)  $0.13 
D)  $2.06 
E)  None of the given answers. 
A)  $4.13 
B)  $2.00 
C)  $0.13 
D)  $2.06 
E)  None of the given answers.

Question 19

Which of the following is not a definition in AASB 102 on inventories:

Accepted Answer

A)  Assets in the form of materials or supplies to be consumed in the production process. 
B)  Assets in the process of production for sale. 
C)  Raw materials to be used in maintaining machines that prepare goods for sale. 
D)  Assets held for sale in the ordinary course of business. 
E)  All of the given answers. 
A)  Assets in the form of materials or supplies to be consumed in the production process. 
B)  Assets in the process of production for sale. 
C)  Raw materials to be used in maintaining machines that prepare goods for sale. 
D)  Assets held for sale in the ordinary course of business. 
E)  All of the given answers.

Question 20

The only difference between the old AASB 1019 and the new AASB 102 is that the 'international' standards allow inventory to be valued using LIFO:

Accepted Answer

A) True 
 B)False

Exam 7: Inventory

AASB 102 requires that inventory is valued at:

AASB 102 requires that fixed manufacturing costs be excluded from the cost of inventories, as they cannot be allocated accurately:

The periodic inventory system operates by:

According to AASB 102 inventories include assets:

AASB 102 requires among others disclosure of which information:

AASB 102 "Inventories" applies to biological assets related to agricultural activity.

David Gordon is an accountant for Bronte Ltd. At the end of the year he realised that ending inventory was overstated but the purchases account was recorded correctly. What is the effect of above error in the income statement and balance sheet (inventory) accounts of Bronte Ltd?

The inventory record of Palm Springs Ltd. shows 1,000 surf boards on stock that cost $50 each. During the last stock take, the accountant noted 100 old style surf boards with net realisable amount of $15. What journal entry would be required of Palm Springs to comply with AASB 102?

In periods where production costs or purchase prices of inventory items do not change, it does not matter which inventory method is adopted as this would generate the same value for cost of goods sold and ending inventory.

A company engaged in buying and selling equity securities should consider this asset as inventory and should be accounted for in accordance with AASB 102.

Reversal of a previous inventory write down is not advocated in AASB 102.

AASB 102 applies to all inventories including work in progress under construction contracts:

Handy Ltd produces a line of brooms. The summary cost information for brooms for the year ended 30 June 2002 is: The level of output for the period was the normal level of production of 290,000 units. What is the cost per broom (rounded to the nearest cent) in accordance with AASB 102 requirements?

Which of the following is not a definition in AASB 102 on inventories:

The only difference between the old AASB 1019 and the new AASB 102 is that the 'international' standards allow inventory to be valued using LIFO:

An Overview of the Australian External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financ

Theories of Financial Accounting

An Overview of Accounting for Assets

Depreciation of Property, Plant and Equipment

Revaluation and Impairment Testing of Non-Current Assets

Accounting for Intangibles

Accounting for Heritage Assets and Biological Assets

An Overview of Accounting for Liabilities

Accounting for Lease

Set-Off and Extinguishment of Debt

Accounting for Employee Benefits

Share Capital and Reserves

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in E

Accounting for Share-Based Payments

Accounting for Income Taxes

Cash-Flow Statements

Accounting for the Extractive Industries

Accounting for General Insurance Contracts

Accounting for Superannuation Plans

Events Occurring After Balance Sheet Date

Segment Reporting

Related-Party Disclosures

Earnings Per Share

Accounting for Group Structures

Further Consolidation Issues I: Accounting for Intragroup Transact

Further Consolidation Issues Ii: Accounting for Minority Interests

Further Consolidation Issues Iii: Accounting for Indirect Ownershi

Further Consolidation Issues Iv: Accounting for Changes in the Deg

Accounting for Equity Investments

Accounting for Equity Investments

Accounting for Foreign Currency Transactions

Translation of the Accounts of Foreign Operations

Accounting for Corporate Social Responsibility

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