Question 1

The lower of cost or net realisable value procedure is used with which of the following?
i.FIFO
ii.Weighted average
iii.The perpetual method

Accepted Answer

A) i. 
B) ii 
C) i,ii 
D) i,ii,iii 
A) i. 
B) ii 
C) i,ii 
D) i,ii,iii D

Question 2

If inventory prices are rising the method of inventory valuation that gives the highest profit and the highest ending inventory is:

Accepted Answer

A) FIFO. 
B) LIFO. 
C) Weighted average. 
D) Perpetual method. 
A) FIFO. 
B) LIFO. 
C) Weighted average. 
D) Perpetual method. A

Question 3

Mikey uses a periodic inventory system and committed an error that understated inventory at the end of Year One.If no further errors occur,at the end of Year Two:

Accepted Answer

A) profit is overstated; equity is overstated. 
B) profit is overstated; equity is correct. 
C) profit is understated; equity is understated. 
D) profit is understated; equity is overstated. 
A) profit is overstated; equity is overstated. 
B) profit is overstated; equity is correct. 
C) profit is understated; equity is understated. 
D) profit is understated; equity is overstated. B

Question 4

With the perpetual method of accounting for inventory,the costing assumption,such as first-in first-out,is applied to:

Accepted Answer

A) cost of sales at the end of the accounting year. 
B) each sale via stock cards or computer records. 
C) inventory at the end of the month. 
D) the current asset inventory in the balance sheet. 
A) cost of sales at the end of the accounting year. 
B) each sale via stock cards or computer records. 
C) inventory at the end of the month. 
D) the current asset inventory in the balance sheet.

Question 5

A major theoretical problem in accounting for inventory is:

Accepted Answer

A) calculating the cost of purchases. 
B) allocating costs between cost of sales and stock on hand. 
C) counting the stock. 
D) deciding which goods are obsolete. 
A) calculating the cost of purchases. 
B) allocating costs between cost of sales and stock on hand. 
C) counting the stock. 
D) deciding which goods are obsolete.

Question 6

A physical stocktake is carried out:

Accepted Answer

A) only under the periodic inventory system. 
B) only under the perpetual inventory system. 
C) under both the periodic and perpetual systems. 
D) under neither the periodic nor the perpetual systems. 
A) only under the periodic inventory system. 
B) only under the perpetual inventory system. 
C) under both the periodic and perpetual systems. 
D) under neither the periodic nor the perpetual systems.

Question 7

Assuming rising prices,which statement is correct?

Accepted Answer

A) FIFO reports a lower value for cost of sales than other methods. 
B) FIFO reports a lower profit than other methods. 
C) FIFO reports a lower value for closing inventory than other methods. 
D) With the FIFO assumption,assuming prices are rising,it is not possible to calculate whether cost of sales/inventory is lower or higher than it would be if other assumptions about inventory valuation were made. 
A) FIFO reports a lower value for cost of sales than other methods. 
B) FIFO reports a lower profit than other methods. 
C) FIFO reports a lower value for closing inventory than other methods. 
D) With the FIFO assumption,assuming prices are rising,it is not possible to calculate whether cost of sales/inventory is lower or higher than it would be if other assumptions about inventory valuation were made.

Question 8

Hall & Co sells calculators.At the beginning of June 100 Z800 scientific calculators were on hand for which the firm had paid $20 each.Purchases and sales for the month were as follows.
Date Purchases Unit Cost Sales
Units units
June 3 120 $21
10 150 $22
29 180
If Hall & Co uses a periodic system with a LIFO cost flow assumption June's cost of sales for the Z800 scientific calculators is:

Accepted Answer

A) $3890. 
B) $3930. 
C) $3980. 
D) $4140. 
A) $3890. 
B) $3930. 
C) $3980. 
D) $4140.

Question 9

Which statement concerning inventory is not true?

Accepted Answer

A) Consistency is an important consideration when alternative accounting methods exist. 
B) Once an inventory costing method is selected management should not deliberately switch to another to manipulate profits. 
C) Accounting data produced in different accounting periods is not comparable if arbitrary changes in accounting methods are permitted. 
D) Consistency rules out ever switching to an alternative accounting method. 
A) Consistency is an important consideration when alternative accounting methods exist. 
B) Once an inventory costing method is selected management should not deliberately switch to another to manipulate profits. 
C) Accounting data produced in different accounting periods is not comparable if arbitrary changes in accounting methods are permitted. 
D) Consistency rules out ever switching to an alternative accounting method.

Question 10

The essence of the perpetual method of accounting for inventory is:

Accepted Answer

A) all movements in each item of stock are tracked via detailed inventory records. 
B) a stocktake is performed. 
C) cost of sales is calculated at the end of the accounting period. 
D) it is useful for high value,low volume items. 
A) all movements in each item of stock are tracked via detailed inventory records. 
B) a stocktake is performed. 
C) cost of sales is calculated at the end of the accounting period. 
D) it is useful for high value,low volume items.

Question 11

Torago Sales uses a periodic inventory system with the weighted average method of cost assignment.The following data are available.
Date Units Unit Cost
$
Jan)6 Beginning inventory 600 10
15 Purchase 1500 11
26 Purchase 1000 12
3100
31 Sale 1000 20
Closing inventory 2100
To the nearest whole dollar what is the value of cost of sales for January?

Accepted Answer

A) $10 000 
B) $10 400 
C) $11 129 
D) $20 000 
A) $10 000 
B) $10 400 
C) $11 129 
D) $20 000

Question 12

The accounting standard that deals with inventories is:

Accepted Answer

A) IAS 10/AASB 1010. 
B) IAS 21/AASB 1021. 
C) IAS 2/ AASB 102. 
D) IAS 103/AASB 1030. 
A) IAS 10/AASB 1010. 
B) IAS 21/AASB 1021. 
C) IAS 2/ AASB 102. 
D) IAS 103/AASB 1030.

Question 13

Which statement relating to the moving average method of costing inventories,used with the perpetual inventory system,is true?

Accepted Answer

A) A new average cost is calculated after each sale and each purchase. 
B) A new average cost is calculated after each sale. 
C) A new average cost is calculated after each purchase. 
D) A new average cost is calculated at the end of each month. 
A) A new average cost is calculated after each sale and each purchase. 
B) A new average cost is calculated after each sale. 
C) A new average cost is calculated after each purchase. 
D) A new average cost is calculated at the end of each month.

Question 14

Liquidator Lounges' showroom was flooded and its inventory was totally destroyed.Its accounting records were damaged but the following information was salvaged.
Sales revenue (to date this period)$380 000
Beginning inventory (at retail) $90 000
Purchases (to date this period at retail)$400 000
Historical gross profit percentage 60%
Assuming the historical gross profit ratio is maintained the estimated cost of inventory lost in the flood is:

Accepted Answer

A) $110 000. 
B) $66 000. 
C) $490 000. 
D) $90 000. 
A) $110 000. 
B) $66 000. 
C) $490 000. 
D) $90 000.

Question 15

If Carmel knows that the ending inventory at retail for her corner store is $16 000 and her cost to retail percentage is 65%,her ending inventory at cost can be estimated as:

Accepted Answer

A) $16 000. 
B) $10 400. 
C) $26 400. 
D) $19 000. 
A) $16 000. 
B) $10 400. 
C) $26 400. 
D) $19 000.

Question 16

Net realisable value in relation to inventory is:

Accepted Answer

A) estimated selling price less stock loss. 
B) estimated discounted value. 
C) estimated replacement value. 
D) estimated selling price less anticipated further costs to complete the sale. 
A) estimated selling price less stock loss. 
B) estimated discounted value. 
C) estimated replacement value. 
D) estimated selling price less anticipated further costs to complete the sale.

Question 17

Inventory is normally classified in the balance sheet as a:

Accepted Answer

A) non-current asset. 
B) current asset. 
C) negative asset. 
D) current liability. 
A) non-current asset. 
B) current asset. 
C) negative asset. 
D) current liability.

Question 18

Which statement relating to the moving average method of costing inventories,used with the perpetual inventory system,is untrue?

Accepted Answer

A) The formula for average cost is cost of goods available for sale divided by units for sale. 
B) A new average cost is calculated after each sale. 
C) A new average cost is calculated after each purchase return. 
D) In periods of rising prices the profit result is between that of the FIFO and LIFO methods. 
A) The formula for average cost is cost of goods available for sale divided by units for sale. 
B) A new average cost is calculated after each sale. 
C) A new average cost is calculated after each purchase return. 
D) In periods of rising prices the profit result is between that of the FIFO and LIFO methods.

Question 19

Won Inc has an historical gross profit percentage of 35%.Net purchases for six months were $1400 and sales were $2000.Inventory at the end of the previous period was $200.If Won Inc prepares an interim balance sheet the amount that can be estimated for closing inventory is:

Accepted Answer

A) $100. 
B) $300. 
C) $1000. 
D) $400. 
A) $100. 
B) $300. 
C) $1000. 
D) $400.

Question 20

A physical count of inventory on hand is known as:

Accepted Answer

A) perpetual inventory method. 
B) stocktake. 
C) realisable value. 
D) average cost. 
A) perpetual inventory method. 
B) stocktake. 
C) realisable value. 
D) average cost.

The lower of cost or net realisable value procedure is used with which of the following? i.FIFO ii.Weighted average iii.The perpetual method

If inventory prices are rising the method of inventory valuation that gives the highest profit and the highest ending inventory is:

Mikey uses a periodic inventory system and committed an error that understated inventory at the end of Year One.If no further errors occur,at the end of Year Two:

With the perpetual method of accounting for inventory,the costing assumption,such as first-in first-out,is applied to:

A major theoretical problem in accounting for inventory is:

A physical stocktake is carried out:

Assuming rising prices,which statement is correct?

Which statement concerning inventory is not true?

The essence of the perpetual method of accounting for inventory is:

The accounting standard that deals with inventories is:

Which statement relating to the moving average method of costing inventories,used with the perpetual inventory system,is true?

If Carmel knows that the ending inventory at retail for her corner store is $16 000 and her cost to retail percentage is 65%,her ending inventory at cost can be estimated as:

Net realisable value in relation to inventory is:

Inventory is normally classified in the balance sheet as a:

Which statement relating to the moving average method of costing inventories,used with the perpetual inventory system,is untrue?

Won Inc has an historical gross profit percentage of 35%.Net purchases for six months were $1400 and sales were $2000.Inventory at the end of the previous period was $200.If Won Inc prepares an interim balance sheet the amount that can be estimated for closing inventory is:

A physical count of inventory on hand is known as:

Decision Making and the Role of Accounting

Financial Statements for Decision Making

Recording Transactions

Adjusting the Accounts and Preparing Financial Statements

Completing the Accounting Cycle Closing and Reversing Entries

Accounting for Retailing

Accounting for Systems

Partnerships: Formation,operation and Reporting

Companies: Formation and Operations

Regulation and the Conceptual Framework

Cash Management and Control

Receivables

Non-Current Assets: Acquisition and Depreciation

Non-Current Assets: Revaluation,disposal and Other Aspects

Liabilities

Presentation of Financial Statements

Statement of Cash Flows

Analysis and Interpretation of Financial Statements

Filters

Exam 13: Inventories

The lower of cost or net realisable value procedure is used with which of the following? i.FIFO ii.Weighted average iii.The perpetual method

If inventory prices are rising the method of inventory valuation that gives the highest profit and the highest ending inventory is:

Mikey uses a periodic inventory system and committed an error that understated inventory at the end of Year One.If no further errors occur,at the end of Year Two:

With the perpetual method of accounting for inventory,the costing assumption,such as first-in first-out,is applied to:

A major theoretical problem in accounting for inventory is:

A physical stocktake is carried out:

Assuming rising prices,which statement is correct?

Which statement concerning inventory is not true?

The essence of the perpetual method of accounting for inventory is:

The accounting standard that deals with inventories is:

Which statement relating to the moving average method of costing inventories,used with the perpetual inventory system,is true?

If Carmel knows that the ending inventory at retail for her corner store is $16 000 and her cost to retail percentage is 65%,her ending inventory at cost can be estimated as:

Net realisable value in relation to inventory is:

Inventory is normally classified in the balance sheet as a:

Which statement relating to the moving average method of costing inventories,used with the perpetual inventory system,is untrue?

Won Inc has an historical gross profit percentage of 35%.Net purchases for six months were $1400 and sales were $2000.Inventory at the end of the previous period was $200.If Won Inc prepares an interim balance sheet the amount that can be estimated for closing inventory is:

A physical count of inventory on hand is known as:

Decision Making and the Role of Accounting

Financial Statements for Decision Making

Recording Transactions

Adjusting the Accounts and Preparing Financial Statements

Completing the Accounting Cycle Closing and Reversing Entries

Accounting for Retailing

Accounting for Systems

Partnerships: Formation,operation and Reporting

Companies: Formation and Operations

Regulation and the Conceptual Framework

Cash Management and Control

Receivables

Non-Current Assets: Acquisition and Depreciation

Non-Current Assets: Revaluation,disposal and Other Aspects

Liabilities

Presentation of Financial Statements

Statement of Cash Flows

Analysis and Interpretation of Financial Statements

Filters