Question 1

With the perpetual method of accounting for inventory the first-in first-out assumption 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) cost of sales at the end of the month. 
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) cost of sales at the end of the month.

Question 2

Florida Inc uses a periodic inventory system with the weighted average method of cost assignment.The following data are available.
Date Units Unit Cost Total
Cost
Beginning inventory Jan 1 2000 $6 $12 000
Purchase Mar 13 4000 $7 $28 000
Purchase June 20 6000 $8 $48 000
Ending inventory Dec 31 1000
The cost of the ending inventory to the nearest dollar is:

Accepted Answer

A) $8333. 
B) $8000. 
C) $7300. 
D) $6000. 
A) $8333. 
B) $8000. 
C) $7300. 
D) $6000.

Question 3

The statement relating to the lower of cost and net realisable value rule that is untrue is which of the following?

Accepted Answer

A) It results in probable losses being recorded in the period when they are first noticed rather than when the sale occurs. 
B) The rule is based on the accounting principle of conservatism (prudence). 
C) The gross profit reported in the period when the rule is applied is higher than it otherwise would be. 
D) The rule is applied separately to each item of inventory or to groups of inventory items. 
A) It results in probable losses being recorded in the period when they are first noticed rather than when the sale occurs. 
B) The rule is based on the accounting principle of conservatism (prudence). 
C) The gross profit reported in the period when the rule is applied is higher than it otherwise would be. 
D) The rule is applied separately to each item of inventory or to groups of inventory items.

Question 4

If inventory costs are rising which method gives the highest profit?

Accepted Answer

A) Weighted average. 
B) FIFO. 
C) LIFO. 
D) It is not possible to calculate which method gives the highest profit. 
A) Weighted average. 
B) FIFO. 
C) LIFO. 
D) It is not possible to calculate which method gives the highest profit.

Question 5

Kingswood Electrical has just completed its annual physical inventory count.The ending inventory was obtained by adding up all the retail price tags for the goods on hand.Determine ending inventory at cost.
Cost Retail
Beginning inventory $ 20 000 $ 60 000
Purchases 133 000 390 000
Goods available for sale $153 000 $450 000
Sales 390 000

Accepted Answer

A) $39 600 
B) $22 600 
C) $20 400 
D) $60 000 
A) $39 600 
B) $22 600 
C) $20 400 
D) $60 000

Question 6

Below is an extract from an income statement.
$
Beginning inventory 14 000
Gross sales 36 000
Freight-in 1 500
Sales returns 2 000
Ending inventory 12 700
Purchases 18 200
The cost of sales is:

Accepted Answer

A) $16 900. 
B) $17 500. 
C) $19 500. 
D) $21 000. 
A) $16 900. 
B) $17 500. 
C) $19 500. 
D) $21 000.

Question 7

The average cost of AD computer modems on 30 March,as per the stock card,is $21.06.If 200 modems are sold at $24.00 each,what is the cost of the modems charged to the income statement,assuming the weighted average method of costing is used?

Accepted Answer

A) $4000 
B) $4800 
C) $4212 
D) $3800 
A) $4000 
B) $4800 
C) $4212 
D) $3800

Question 8

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

Accepted Answer

A) it produces a higher gross profit than the periodic method. 
B) a stocktake is performed. 
C) cost of sales is calculated at the end of the accounting period. 
D) all movements in each item of stock are tracked via detailed inventory records. 
A) it produces a higher gross profit than the periodic method. 
B) a stocktake is performed. 
C) cost of sales is calculated at the end of the accounting period. 
D) all movements in each item of stock are tracked via detailed inventory records.

Question 9

Which item should not be included in the income statement's cost of inventory?

Accepted Answer

A) The invoice price of the goods 
B) Costs associated with receiving and inspecting the goods 
C) Costs incurred in preparing the goods for sale 
D) GST 
A) The invoice price of the goods 
B) Costs associated with receiving and inspecting the goods 
C) Costs incurred in preparing the goods for sale 
D) GST

Question 10

The accounting standards governing determination of the cost of inventories are:

Accepted Answer

A) IAS 2/AASB 102. 
B) IAS 8/AASB 108. 
C) IAS 13/AASB 108. 
D) IAS 34/AASB 134. 
A) IAS 2/AASB 102. 
B) IAS 8/AASB 108. 
C) IAS 13/AASB 108. 
D) IAS 34/AASB 134.

Question 11

Which of the following is a disadvantage to business of the LIFO method of applying costs to inventory?

Accepted Answer

A) Current income is matched with the most recent costs of acquiring goods. 
B) It understates the balance sheet value for inventory. 
C) It is difficult for a computer program to apply the method. 
D) If it is allowed for tax purposes,in times of rising prices it results in less tax being paid in the current period. 
A) Current income is matched with the most recent costs of acquiring goods. 
B) It understates the balance sheet value for inventory. 
C) It is difficult for a computer program to apply the method. 
D) If it is allowed for tax purposes,in times of rising prices it results in less tax being paid in the current period.

Question 12

Under IAS 2/AASB 102 the costing method that is not permitted is:

Accepted Answer

A) LIFO. 
B) weighted/moving average. 
C) FIFO. 
D) specific identification. 
A) LIFO. 
B) weighted/moving average. 
C) FIFO. 
D) specific identification.

Question 13

How many of these are reasons for the selling value of some inventory items falling below their cost price?
-Obsolescence
-Damage
-Past use-by date
-A rise in the market price

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 14

Identify the statement relating to the lower of cost and net realisable value rule that is untrue.

Accepted Answer

A) It results in probable losses being recorded in the period when they are first noticed rather than when the sale occurs. 
B) The rule is based on the accounting principle of prudence (conservatism). 
C) The gross profit reported in the period when the rule is applied is higher than it otherwise would be. 
D) The rule is applied separately to each item of inventory or to groups of inventory. 
A) It results in probable losses being recorded in the period when they are first noticed rather than when the sale occurs. 
B) The rule is based on the accounting principle of prudence (conservatism). 
C) The gross profit reported in the period when the rule is applied is higher than it otherwise would be. 
D) The rule is applied separately to each item of inventory or to groups of inventory.

Question 15

Inventory is defined as goods held for resale in the ordinary course of business.Which of the following would not be included in inventory for any type of business?

Accepted Answer

A) Land held for resale 
B) Cash at bank 
C) Work in process 
D) Computers 
A) Land held for resale 
B) Cash at bank 
C) Work in process 
D) Computers

Question 16

Which of these is not one of the methods used to assign costs between cost of sales and closing inventory?

Accepted Answer

A) Specific identification 
B) First-in first-out 
C) Lower of cost and net realisable value 
D) Weighted average 
A) Specific identification 
B) First-in first-out 
C) Lower of cost and net realisable value 
D) Weighted average

Question 17

The ratio that indicates an entity's overall mark-up on goods sold is the:

Accepted Answer

A) return on inventory ratio. 
B) gross profit ratio. 
C) inventory turnover ratio. 
D) profit margin ratio. 
A) return on inventory ratio. 
B) gross profit ratio. 
C) inventory turnover ratio. 
D) profit margin ratio.

Question 18

Which statement relating to the determination of the cost of inventory in a computerised system is not true?

Accepted Answer

A) Determining the cost of inventory is greatly simplified compared to a manual system. 
B) Computerised systems generally use the periodic inventory system. 
C) Computerised inventory systems are now used by most firms. 
D) The system can automatically produce reorder information. 
A) Determining the cost of inventory is greatly simplified compared to a manual system. 
B) Computerised systems generally use the periodic inventory system. 
C) Computerised inventory systems are now used by most firms. 
D) The system can automatically produce reorder information.

Question 19

Which of the following information concerning inventory is not required to be disclosed in the external financial reports?

Accepted Answer

A) Finished goods 
B) Work in process 
C) Inventory turnover ratio 
D) Method of valuation, 
E) g.FIFO,weighted average 
A) Finished goods 
B) Work in process 
C) Inventory turnover ratio 
D) Method of valuation, 
E) g.FIFO,weighted average

Question 20

Indigo Ltd uses the FIFO assumption with the periodic inventory method.
Units Unit Total
Cost cost
Beginning inventory 12 $10 $120
Purchase 10 $12 $120
Purchase 6 $11 $66
Sales during year were 16 units.What was the value assigned to the closing stock of this item at the end of the period?

Accepted Answer

A) $66 
B) $120 
C) $138 
D) $144 
A) $66 
B) $120 
C) $138 
D) $144

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

The statement relating to the lower of cost and net realisable value rule that is untrue is which of the following?

If inventory costs are rising which method gives the highest profit?

Below is an extract from an income statement. $ Beginning inventory 14 000 Gross sales 36 000 Freight-in 1 500 Sales returns 2 000 Ending inventory 12 700 Purchases 18 200 The cost of sales is:

The average cost of AD computer modems on 30 March,as per the stock card,is $21.06.If 200 modems are sold at $24.00 each,what is the cost of the modems charged to the income statement,assuming the weighted average method of costing is used?

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

Which item should not be included in the income statement's cost of inventory?

The accounting standards governing determination of the cost of inventories are:

Which of the following is a disadvantage to business of the LIFO method of applying costs to inventory?

Under IAS 2/AASB 102 the costing method that is not permitted is:

How many of these are reasons for the selling value of some inventory items falling below their cost price? -Obsolescence -Damage -Past use-by date -A rise in the market price

Identify the statement relating to the lower of cost and net realisable value rule that is untrue.

Inventory is defined as goods held for resale in the ordinary course of business.Which of the following would not be included in inventory for any type of business?

Which of these is not one of the methods used to assign costs between cost of sales and closing inventory?

The ratio that indicates an entity's overall mark-up on goods sold is the:

Which statement relating to the determination of the cost of inventory in a computerised system is not true?

Which of the following information concerning inventory is not required to be disclosed in the external financial reports?

Indigo Ltd uses the FIFO assumption with the periodic inventory method. Units Unit Total Cost cost Beginning inventory 12 $10 $120 Purchase 10 $12 $120 Purchase 6 $11 $66 Sales during year were 16 units.What was the value assigned to the closing stock of this item at the end of the period?

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

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Exam 13: Inventories

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

The statement relating to the lower of cost and net realisable value rule that is untrue is which of the following?

If inventory costs are rising which method gives the highest profit?

Below is an extract from an income statement. $ Beginning inventory 14 000 Gross sales 36 000 Freight-in 1 500 Sales returns 2 000 Ending inventory 12 700 Purchases 18 200 The cost of sales is:

The average cost of AD computer modems on 30 March,as per the stock card,is $21.06.If 200 modems are sold at $24.00 each,what is the cost of the modems charged to the income statement,assuming the weighted average method of costing is used?

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

Which item should not be included in the income statement's cost of inventory?

The accounting standards governing determination of the cost of inventories are:

Which of the following is a disadvantage to business of the LIFO method of applying costs to inventory?

Under IAS 2/AASB 102 the costing method that is not permitted is:

How many of these are reasons for the selling value of some inventory items falling below their cost price? -Obsolescence -Damage -Past use-by date -A rise in the market price

Identify the statement relating to the lower of cost and net realisable value rule that is untrue.

Inventory is defined as goods held for resale in the ordinary course of business.Which of the following would not be included in inventory for any type of business?

Which of these is not one of the methods used to assign costs between cost of sales and closing inventory?

The ratio that indicates an entity's overall mark-up on goods sold is the:

Which statement relating to the determination of the cost of inventory in a computerised system is not true?

Which of the following information concerning inventory is not required to be disclosed in the external financial reports?

Indigo Ltd uses the FIFO assumption with the periodic inventory method. Units Unit Total Cost cost Beginning inventory 12 $10 $120 Purchase 10 $12 $120 Purchase 6 $11 $66 Sales during year were 16 units.What was the value assigned to the closing stock of this item at the end of the period?

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

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