Question 1

Under AASB 102 revaluations are permitted:

Accepted Answer

A)  only in the form of a write-down. 
B)  only when an independent valuation is made by an external party. 
C)  only if upward revaluations are credited to an inventory revaluation reserve. 
D)  only if the replacement cost of the asset is higher than the historical cost. 
A)  only in the form of a write-down. 
B)  only when an independent valuation is made by an external party. 
C)  only if upward revaluations are credited to an inventory revaluation reserve. 
D)  only if the replacement cost of the asset is higher than the historical cost.

Question 2

The only difference between IAS 2 and AASB 102 is that the 'international' standards allow inventory to be valued using LIFO.

Accepted Answer

A) True 
 B)False

Question 3

Generally,AASB 102 requires inventories to be measured at cost or net realisable value.Discuss circumstances when other measurement bases (such as current replacement cost)are permitted.

Accepted Answer

AASB 102, the Australian Accounting Stan

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

The first-in,first-out (FIFO)method assumes that items remaining in inventory at the end of the period are those most recently purchased or produced.

Accepted Answer

A) True 
 B)False

Question 6

Video Productions Ltd commenced business manufacturing video tapes on 1 July 2011.Summary data for the first full year of production 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)  $66 400 
B)  $72 000 
C)  $46 400 
D)  $50 000 
A)  $66 400 
B)  $72 000 
C)  $46 400 
D)  $50 000

Question 7

The value of inventory reported in the financial statements under AASB 102 may be reported at an amount lower than its original cost.

Accepted Answer

A) True 
 B)False

Question 8

Using the periodic system of inventory:

Accepted Answer

A)  gives the same results as a perpetual system when FIFO is applied but without some of the extra detail. 
B)  is much more cost-effective as a perpetual system requires a computer. 
C)  does not require a stock take each year and is therefore more accurate. 
D)  accurately reports all stock movements which assists with decision making. 
A)  gives the same results as a perpetual system when FIFO is applied but without some of the extra detail. 
B)  is much more cost-effective as a perpetual system requires a computer. 
C)  does not require a stock take each year and is therefore more accurate. 
D)  accurately reports all stock movements which assists with decision making.

Question 9

Weighted-average cost will generate results that are:

Accepted Answer

A)  higher value that LIFO. 
B)  higher value than FIFO. 
C)  in between LIFO and FIFO. 
D)  higher value that LIFO and FIFO. 
A)  higher value that LIFO. 
B)  higher value than FIFO. 
C)  in between LIFO and FIFO. 
D)  higher value that LIFO and FIFO.

Question 10

Explain the circumstances where borrowing costs are permitted to be included in the cost of inventories?

Accepted Answer

Borrowing costs are generally the intere

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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. 
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.

Question 13

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 
$$\begin{array} { | l | r | r | r | r | } 
\hline  { \text { Item } } & \begin{array} { c } 
\text { Production cost } \
\$ 000
\end{array} & \begin{array} { c } 
\text { Sales proceeds } \
\$ 000
\end{array} & \begin{array} { c } 
\text { Packaging costs } \
\$ 000
\end{array} & \begin{array} { c } 
\text { Freight outwards } \
\$ 000
\end{array} \
\hline \text { Sling back } & 13 & 15 & 3 & 2 \
\hline \text { Court } & 10 & 16 & 3 & 1 \
\hline \text { Stiletto } & 17 & 19 & 4 & 3 \
\hline
\end{array}$$
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 
A)  $34 000 
B)  $40 000 
C)  $32 000 
D)  $24 000

Question 14

AASB 102 on inventories does not apply to:

Accepted Answer

A)  trees held for sale as part of forestry operations. 
B)  work-in-progress under construction contracts. 
C)  agricultural produce of a biological asset. 
D)  any of the given answers. 
A)  trees held for sale as part of forestry operations. 
B)  work-in-progress under construction contracts. 
C)  agricultural produce of a biological asset. 
D)  any of the given answers.

Question 15

Oblong Ltd manufactures cardboard boxes for a variety of purposes.The following information relates to the production of the extra large packing boxes used by removalists for the period ended 30 June 2012. 
$$\begin{array} { | l | l | r | } 
\hline \text { Date } & \text { Manufactured } & \text { Units sold } \
\hline 1 \text { July (balance) } & 100 @ \$ 3.05 & \
\hline 15 \text { July 2011 } & 300 @ \$ 3.00 & \
\hline 19 \text { July 2011 } & & 250 \
\hline 20 \text { August } 2011 & 200 @ \$ 2.50 & \
\hline 21 \text { August 2011 } & & 190 \
\hline 15 \text { October 2011 } & 170 @ \$ 3.12 & \
\hline 30 \text { October 2011 } & & 200 \
\hline 15 \text { December 2011 } & 320 @ \$ 3.40 & \
\hline 15 \text { January 2012 } & & 175 \
\hline 13 \text { March 2012 } & 90 @ \$ 2.90 & \
\hline 30 \text { March 2012 } & & 220 \
\hline 15 \text { June 2012 } & 80 @ \$ 3.20 & \
\hline 28 \text { June 2012 } & & 100 \
\hline
\end{array}$$
The company uses a perpetual inventory system.The net realisable value per extra large cardboard box is $3.15 at the end of the period.What are the costs of sales and the value of ending inventory for Oblong Ltd assuming the FIFO cost-flow assumption is used?

Accepted Answer

A)  cost of sales: $3460.40; ending inventory: $380.00 
B)  cost of sales: $3453.90; ending inventory: $386.50 
C)  cost of sales: $3459.41; ending inventory: $380.99 
D)  cost of sales: $3453.90 ending inventory: $393.75 
A)  cost of sales: $3460.40; ending inventory: $380.00 
B)  cost of sales: $3453.90; ending inventory: $386.50 
C)  cost of sales: $3459.41; ending inventory: $380.99 
D)  cost of sales: $3453.90 ending inventory: $393.75

Question 16

The cost of inventory is defined by AASB 102 as including:

Accepted Answer

A)  the cost of purchase and conversion. 
B)  duties and taxes on purchase of goods or services for sale. 
C)  the cost incurred in the normal course of operations to bring the inventories to their present location and condition. 
D)  all of the given answers. 
A)  the cost of purchase and conversion. 
B)  duties and taxes on purchase of goods or services for sale. 
C)  the cost incurred in the normal course of operations to bring the inventories to their present location and condition. 
D)  all of the given answers.

Question 17

AASB 102 requires,among others,disclosure of which of the following pieces of 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 
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

Question 18

According to AASB 102 inventories include assets:

Accepted Answer

A)  such as service contracts arising under construction contracts. 
B)  held over the 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. 
A)  such as service contracts arising under construction contracts. 
B)  held over the 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.

Question 19

Under the perpetual system,a difference with the stocktake records might indicate:

Accepted Answer

A)  damaged stock. 
B)  theft of stock. 
C)  obsolete stock. 
D)  all of the given answers. 
A)  damaged stock. 
B)  theft of stock. 
C)  obsolete stock. 
D)  all of the given answers.

Question 20

Which of the following statements is correct in relation to the costing of inventories?

Accepted Answer

A)  Direct costing treats fixed production costs as an expense of the period and is not permitted as a method for valuing inventories under AASB 102. 
B)  Absorption costing treats fixed production costs as a product cost, allocating them to the goods produced, and is not permitted as a method for valuing inventories under AASB 102. 
C)  Absorption costing treats fixed production costs as an expense of the period and is the required method for valuing inventories under AASB 102. 
D)  Direct costing treats fixed production costs as a product cost, allocating them to the goods produced, and is not permitted as a method of valuing inventory under AASB 102. 
A)  Direct costing treats fixed production costs as an expense of the period and is not permitted as a method for valuing inventories under AASB 102. 
B)  Absorption costing treats fixed production costs as a product cost, allocating them to the goods produced, and is not permitted as a method for valuing inventories under AASB 102. 
C)  Absorption costing treats fixed production costs as an expense of the period and is the required method for valuing inventories under AASB 102. 
D)  Direct costing treats fixed production costs as a product cost, allocating them to the goods produced, and is not permitted as a method of valuing inventory under AASB 102.

Exam 7: Inventory

Under AASB 102 revaluations are permitted:

The only difference between IAS 2 and AASB 102 is that the 'international' standards allow inventory to be valued using LIFO.

Generally,AASB 102 requires inventories to be measured at cost or net realisable value.Discuss circumstances when other measurement bases (such as current replacement cost)are permitted.

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

The first-in,first-out (FIFO)method assumes that items remaining in inventory at the end of the period are those most recently purchased or produced.

The value of inventory reported in the financial statements under AASB 102 may be reported at an amount lower than its original cost.

Using the periodic system of inventory:

Weighted-average cost will generate results that are:

Explain the circumstances where borrowing costs are permitted to be included in the cost of inventories?

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

The periodic inventory system operates by:

AASB 102 on inventories does not apply to:

The cost of inventory is defined by AASB 102 as including:

AASB 102 requires,among others,disclosure of which of the following pieces of information?

According to AASB 102 inventories include assets:

Under the perpetual system,a difference with the stocktake records might indicate:

Which of the following statements is correct in relation to the costing of inventories?

An Overview of the Australian External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of Accounting

An Overview of Accounting for Assets

Depreciation of Property, plant and Equipment

Revaluations 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 Leases

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 Equity

Accounting for Share-Based Payments

Accounting for Income Taxes

The Statement of Cash Flows

Accounting for the Extractive Industries

Accounting for General Insurance Contracts

Accounting for Superannuation Plans

Events Occurring After the End of the Reporting Period

Segment Reporting

Related Party Disclosures

Earnings Per Share

Accounting for Group Structures

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues IV: Accounting for Changes in the Degree of Ownership of a Subsidiary

Accounting for Equity Investments,including Investments in Associates and Joint Arrangements

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

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