Question 1

The weighted average inventories costing method is particularly suitable to inventories where:

Accepted Answer

A)  dissimilar products are stored in separate locations. 
B)  homogeneous products are mixed together. 
C)  the entity carries stocks of raw materials, work-in-progress and finished goods. 
D)  goods have distinct use-by dates and the goods produced first must be sold earliest. 
A)  dissimilar products are stored in separate locations. 
B)  homogeneous products are mixed together. 
C)  the entity carries stocks of raw materials, work-in-progress and finished goods. 
D)  goods have distinct use-by dates and the goods produced first must be sold earliest. B

Question 2

Under the periodic inventories approach, the cost of goods sold is calculated as:

Accepted Answer

A)  Opening inventories + net purchases + closing inventories 
B)  Opening inventories - net purchases + closing inventories 
C)  Beginning inventories + net purchases - ending inventories 
D)  Beginning inventories - net purchases - ending inventories 
A)  Opening inventories + net purchases + closing inventories 
B)  Opening inventories - net purchases + closing inventories 
C)  Beginning inventories + net purchases - ending inventories 
D)  Beginning inventories - net purchases - ending inventories C

Question 3

Which of the following measurement rules applies to inventories subsequent to their initial measurement?

Accepted Answer

A)  Historical cost 
B)  Fair value 
C)  Replacement cost 
D)  Lower of cost and net realisable value 
A)  Historical cost 
B)  Fair value 
C)  Replacement cost 
D)  Lower of cost and net realisable value D

Question 4

Which of the following is not recognised as an expense in accordance with AASB 102:

Accepted Answer

A)  Write-downs of inventories to net realisable value 
B)  Reversal of write downs to net realisable value 
C)  Cost of goods sold 
D)  Inventories items used by an entity as components in self-constructed property, plant or equipment 
A)  Write-downs of inventories to net realisable value 
B)  Reversal of write downs to net realisable value 
C)  Cost of goods sold 
D)  Inventories items used by an entity as components in self-constructed property, plant or equipment

Question 5

Which of the following statements is correct?

Accepted Answer

A)  The relationship between the closing inventories balance under the periodic and perpetual methods will depend on whether the FIFO or weighted average method is used to value inventories. 
B)  Closing inventories will always be the same under the periodic and perpetual methods. 
C)  The periodic method of accounting for inventories will always result in a lower closing inventories balance than the perpetual method. 
D)  The periodic method of accounting for inventories will always result in a higher closing inventories balance than the perpetual method. 
A)  The relationship between the closing inventories balance under the periodic and perpetual methods will depend on whether the FIFO or weighted average method is used to value inventories. 
B)  Closing inventories will always be the same under the periodic and perpetual methods. 
C)  The periodic method of accounting for inventories will always result in a lower closing inventories balance than the perpetual method. 
D)  The periodic method of accounting for inventories will always result in a higher closing inventories balance than the perpetual method.

Question 6

AASB 102 allows which of the following to be capitalised into the cost of inventories?

Accepted Answer

A)  Selling costs. 
B)  Normal costs of material wastage. 
C)  Storage costs for finished goods. 
D)  Administrative overheads. 
A)  Selling costs. 
B)  Normal costs of material wastage. 
C)  Storage costs for finished goods. 
D)  Administrative overheads.

Question 7

AASB 102 Inventories requires separate disclosure of:

Accepted Answer

A)  the amount of inventories recognised as an expense. 
B)  the carrying amount of inventories pledged as security for loans. 
C)  the circumstances that led to a reversal of a previous write down of inventories. 
D)  All of these options. 
A)  the amount of inventories recognised as an expense. 
B)  the carrying amount of inventories pledged as security for loans. 
C)  the circumstances that led to a reversal of a previous write down of inventories. 
D)  All of these options.

Question 8

Inventories are to be measured at the lower of cost or net realisable value. Net realisable value is defined in AASB 102/IAS 2 Inventories as:

Accepted Answer

A)  the fair value of the inventories at purchase date. 
B)  the amount paid for the purchase of the inventories in an arm's length transaction. 
C)  the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. 
D)  the estimated buying price in the ordinary course of business. 
A)  the fair value of the inventories at purchase date. 
B)  the amount paid for the purchase of the inventories in an arm's length transaction. 
C)  the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. 
D)  the estimated buying price in the ordinary course of business.

Question 9

Stock take discrepancies between a count sheet and recorded quantities in the ledger may arise due to which of the following: I. Stock in transit purchased under FOB destination terms
II. Consignment stock included in the physical count by the consignee 
III. Sales returns not being processed into the ledger 
IV. Theft of stock during the year

Accepted Answer

A)  I, II and III 
B)  I, III and IV 
C)  II, III and IV 
D)  I, II and IV 
A)  I, II and III 
B)  I, III and IV 
C)  II, III and IV 
D)  I, II and IV

Question 10

When an inventories costing formula is changed, the change is required to be applied:

Accepted Answer

A)  prospectively and the adjustment taken through the current profit or loss. 
B)  prospectively and the current period adjustment recognised directly in equity. 
C)  retrospectively and the adjustment taken through the opening balance of retained earnings. 
D)  retrospectively and the adjustment recognised as an extraordinary gain or loss. 
A)  prospectively and the adjustment taken through the current profit or loss. 
B)  prospectively and the current period adjustment recognised directly in equity. 
C)  retrospectively and the adjustment taken through the opening balance of retained earnings. 
D)  retrospectively and the adjustment recognised as an extraordinary gain or loss.

Question 11

AASB 102 Inventories requires service providers to write down their inventories to net realisable value:

Accepted Answer

A)  on a class-by-class basis (e.g raw materials). 
B)  on an item-by-item basis. 
C)  on a group basis. 
D)  according to location or geographical segment within the entity. 
A)  on a class-by-class basis (e.g raw materials). 
B)  on an item-by-item basis. 
C)  on a group basis. 
D)  according to location or geographical segment within the entity.

Question 12

AASB 102 Inventories specifies that the measurement rule for inventories is:

Accepted Answer

A)  higher of initial cost and realisable value. 
B)  higher of production costs and selling price. 
C)  lower of fair value and selling price. 
D)  lower of cost and net realisable value. 
A)  higher of initial cost and realisable value. 
B)  higher of production costs and selling price. 
C)  lower of fair value and selling price. 
D)  lower of cost and net realisable value.

Question 13

Which of the following are common classifications for inventories in the financial statements: $\begin{array}{lllll}&I.&II.&III.&IV\
\text { Raw materials } & \text { No } & \text { Yes } & \text { No } & \text { Yes } \
\text { Finished goods } & \text { Yes } & \text { Yes } & \text { Yes } & \text { Yes } \
\text { Work in progress } & \text { No } & \text { No } & \text { Yes } & \text { Yes } \
\text { Assets held for resale } & \text { Yes } & \text { No } & \text { No } & \text { Yes }
\end{array}$

Accepted Answer

A)  I. 
B)  II. 
C)  III. 
D)  IV. 
A)  I. 
B)  II. 
C)  III. 
D)  IV.

Question 14

Where the net realisable value of inventories falls below cost, AASB 102 Inventories requires that:

Accepted Answer

A)  no adjustment be made, but the difference between net realisable value and cost be disclosed in the notes to the financial statements. 
B)  the difference be added to the carrying amount of the inventories. 
C)  inventories continue to be carried in the statement of financial position at cost. 
D)  inventories be written down to net realisable value. 
A)  no adjustment be made, but the difference between net realisable value and cost be disclosed in the notes to the financial statements. 
B)  the difference be added to the carrying amount of the inventories. 
C)  inventories continue to be carried in the statement of financial position at cost. 
D)  inventories be written down to net realisable value.

Question 15

Trio Ltd uses a periodic inventories system and rounds the average unit cost to the nearest dollar. The following data relates to Trio Ltd for the year ended 30 June 2021. $\begin{array}{ll}\text { Opening inventories }&\text { 150units@average cost of \$32 each }\
\text { January purchases } & 35 \text { units @ \$35 each } \
\text { March purchases } & 18 \text { units @ } \$ 38 \text { each }\
\text { June purchases } & 50 \text { units @ \$30 each } \
\text { September purchases } & 27 \text { units @ \$32 each } \
\text { Ending inventories } & 65 \text { units }
\end{array}$ The cost of ending inventories using the weighted average cost method (rounded to the nearest dollar) is:

Accepted Answer

A)  $2 106 
B)  $2 136 
C)  $4 273 
D)  $6 966 
A)  $2 106 
B)  $2 136 
C)  $4 273 
D)  $6 966

Question 16

Which of the following is an appropriate journal entry to recognise inventories items that have been stolen? a. DR Inventories (asset)
$\quad$CR Provision for inventories losses (liability)
b. DR Inventories losses (expense)
$\quad$CR Inventories (asset)
c. DR Cost of goods sold (expense)
$\quad$CR Inventories (asset)
d. DR Provision for inventories losses (liability)
$\quad$CR Inventories (asset)

Accepted Answer

The answer of Which of the following is an appropriate...

Question 17

The write down of inventories to net realisable value in a prior period:

Accepted Answer

A)  can be reversed in a later period with no upper limit from a previous write down. 
B)  cannot be reversed in a later period.. 
C)  can be reversed in a later period but only to the upper limit of the original write down. 
D)  can be reversed in a later period so long as the value is recovered within 2 years of the original write down. 
A)  can be reversed in a later period with no upper limit from a previous write down. 
B)  cannot be reversed in a later period.. 
C)  can be reversed in a later period but only to the upper limit of the original write down. 
D)  can be reversed in a later period so long as the value is recovered within 2 years of the original write down.

Question 18

Taxes may be included in the cost of inventories except for those taxes that are:

Accepted Answer

A)  levied on the inventories by a foreign government. 
B)  recoverable by the entity from the taxation authority. 
C)  in the nature of import duties. 
D)  imposed on the raw materials component of manufactured inventories. 
A)  levied on the inventories by a foreign government. 
B)  recoverable by the entity from the taxation authority. 
C)  in the nature of import duties. 
D)  imposed on the raw materials component of manufactured inventories.

Question 19

The terms '2/10, n/30' appearing on an invoice for the sale/purchase of inventories means that the buyer:

Accepted Answer

A)  will receive a 10% discount if paid within 2 days of the invoice date, otherwise the full amount must be paid within 30 days of the invoice date. 
B)  will receive a 2% discount if paid within 10 days of the invoice date, otherwise the full amount must be paid within 30 days of the invoice date. 
C)  has 10 days from the invoice date to pay the full amount or a 2% surcharge will be applied and total amount owing must be paid within 30 days of invoice date. 
D)  has 2 days from the invoice date to pay the full amount or a 7% surcharge will be applied and total amount owing must be paid within 30 days of invoice date. 
A)  will receive a 10% discount if paid within 2 days of the invoice date, otherwise the full amount must be paid within 30 days of the invoice date. 
B)  will receive a 2% discount if paid within 10 days of the invoice date, otherwise the full amount must be paid within 30 days of the invoice date. 
C)  has 10 days from the invoice date to pay the full amount or a 2% surcharge will be applied and total amount owing must be paid within 30 days of invoice date. 
D)  has 2 days from the invoice date to pay the full amount or a 7% surcharge will be applied and total amount owing must be paid within 30 days of invoice date.

Question 20

AASB 102 requires disclosure of which of the following? I. The carrying amount of inventories by class.
II. The accounting policy adopted by the entity in relation to inventories valuation.
III. Separate disclosure of the carrying amount of inventories carried at cost and those carried at net realisable value.
IV. Details of reversals of prior year write-downs.

Accepted Answer

A)  II and III only 
B)  I, II and III only 
C)  II, III and IV only 
D)  I, II, III and IV 
A)  II and III only 
B)  I, II and III only 
C)  II, III and IV only 
D)  I, II, III and IV

Exam 4: Inventories

The weighted average inventories costing method is particularly suitable to inventories where:

Under the periodic inventories approach, the cost of goods sold is calculated as:

Which of the following measurement rules applies to inventories subsequent to their initial measurement?

Which of the following is not recognised as an expense in accordance with AASB 102:

Which of the following statements is correct?

AASB 102 allows which of the following to be capitalised into the cost of inventories?

AASB 102 Inventories requires separate disclosure of:

Inventories are to be measured at the lower of cost or net realisable value. Net realisable value is defined in AASB 102/IAS 2 Inventories as:

When an inventories costing formula is changed, the change is required to be applied:

AASB 102 Inventories requires service providers to write down their inventories to net realisable value:

AASB 102 Inventories specifies that the measurement rule for inventories is:

Which of the following are common classifications for inventories in the financial statements: I. II. III. IV Raw materials No Yes No Yes Finished goods Yes Yes Yes Yes Work in progress No No Yes Yes Assets held for resale Yes No No Yes

Where the net realisable value of inventories falls below cost, AASB 102 Inventories requires that:

The write down of inventories to net realisable value in a prior period:

Taxes may be included in the cost of inventories except for those taxes that are:

The terms '2/10, n/30' appearing on an invoice for the sale/purchase of inventories means that the buyer:

Accounting Regulation and the Conceptual Framework

Application of Accounting Theory

Fair Value Measurement

Property, Plant and Equipment

Intangible Assets

Impairment of Assets

Provisions, Contingent Liabilities and Contingent Assets

Employee Benefits

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Financial Instruments

Income Taxes

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Presentation of Financial Statements

Statement of Cash Flows

Accounting Policies and Other Disclosures

Earnings Per Share

Operating Segments

Related Party Disclosures

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Foreign Currency Transactions and Forward Exchange Contracts

Translation of Foreign Currency Financial Statements

Business Combinations

Consolidation: Controlled Entities

Consolidation: Wholly Owned Entities

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Consolidation: Other Issues

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