Question 1

What is the implication on valuation of work-in-progress inventories when the net realisable value is lower than the carrying amount of the asset?

Accepted Answer

When the net realizable value (NRV) of w

Question 2

AASB 102 requires that the specific identification method of assigning cost to items of inventory be applied:

Accepted Answer

A)  wherever possible in order to achieve the most accurate cost figure. 
B)  to items of inventory that are ordinarily interchangeable or identical and have significant individual dollar value. 
C)  wherever items are separately identifiable and of significant individual dollar value. 
D)  to items of inventory that are not ordinarily interchangeable or are produced and segregated for specific projects. 
A)  wherever possible in order to achieve the most accurate cost figure. 
B)  to items of inventory that are ordinarily interchangeable or identical and have significant individual dollar value. 
C)  wherever items are separately identifiable and of significant individual dollar value. 
D)  to items of inventory that are not ordinarily interchangeable or are produced and segregated for specific projects.

Question 3

Fixed production costs are those that,within normal operating limits:

Accepted Answer

A)  vary in relation to production volume by a fixed amount. 
B)  remain a constant per unit amount as volume changes. 
C)  vary in relation to the levels of input but remain constant at varying levels of output. 
D)  remain a constant amount at varying production volume levels. 
A)  vary in relation to production volume by a fixed amount. 
B)  remain a constant per unit amount as volume changes. 
C)  vary in relation to the levels of input but remain constant at varying levels of output. 
D)  remain a constant amount at varying production volume levels.

Question 4

Big Games for Big Kids sell a variety of gaming consoles and games.The company 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 in November with 50 units on hand valued at $1500.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. 
\(\begin{array}{|l|l|r|}
\hline&&\$\
\hline\
\hline\
\hline \text { Opening imventory-1 November } 2011 & 50 \text { units } & 1500 \
\hline\
\hline\
\hline \text { Sales on } 9 \text { November 2011 } & 45 \text { units } @ \$ 90 & 4050 \
\hline \text { Purchases on 10 November 2011 } & 70 \text { units } @\$ 40 & 2800 \
\hline \text { Sales on 12 November 2011 } &60 \text { units } @ \$ 90 & 5400 \
\hline \text { Purchases on 24 November 2011 } & 50 \text { units @ } \$ 40 & 2000 \
\hline \text { Sales on 1 December 2011 } & 50 \text { units } @\$ 90 & 4500 \
\hline \text { Purchases on 1 December 2011 } & 80 \text { units } @ \$47 & 3760 \
\hline \text { Sales on 24 December 2011 } & 60 \text { units } @ \$ 90 & 5400 \
\hline \text { Purchases on 29 December 2011 } & 100 \text { units } @ \$ 50 & 5000 \
\hline \text { Sales on January 2012 } & 90 \text { units @ } \$ 50 & 4500 \
\hline \text { Purchases on 10 January 2012 } & 10 \text { units } @\$ 42 & 420 \
\hline \text { Sales on 15 January 2012 } & 20 \text { units } @ \$50 & 1000\
\hline
\end{array}\)
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 
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

Question 5

Bondi Ltd is a small sport shop.At the beginning of the period,Bondi Ltd had 30 tennis racquets on hand costing $50 each.On 31 October 2009,the shop sold 20 racquets to a tennis instructor for $80.A delivery of 50 racquets was received on 15 November 2009 at $50 but received 2% discount if the account is paid within 30 days.What are the appropriate journal entries to recognise above transactions using the periodic system?

Accepted Answer

A) 
  
B) 
  
C) 
  
D) 
  
A) 
  
B) 
  
C) 
  
D)

Question 6

The definition of inventories includes assets in the form of materials or supplies to be consumed in the production process or in rendering of services.

Accepted Answer

A) True 
 B)False

Question 7

Consistent with positive accounting theory,an entity close to breaching their debt covenant will:

Accepted Answer

A)  prefer LIFO method over FIFO method. 
B)  prefer FIFO method over LIFO method. 
C)  prefer weighted average method over FIFO method. 
D)  prefer moving average method over FIFO method. 
A)  prefer LIFO method over FIFO method. 
B)  prefer FIFO method over LIFO method. 
C)  prefer weighted average method over FIFO method. 
D)  prefer moving average method over FIFO method.

Question 8

Discuss when a standard cost may be used to arrive at the cost of inventory.

Accepted Answer

Standard cost is often used to arrive at

Question 9

Some biological assets may be covered by AASB 102 Inventories.

Accepted Answer

A) True 
 B)False

Question 10

Las Vegas Ltd sells second hand luxury cars of various makes and models,and uses the FIFO cost flow assumption to ascertain the cost of ending inventory.This would be incorrect because:

Accepted Answer

A)  this is not the practice used by other car dealerships. 
B)  this method will overstate profit. 
C)  this method will not capture unique characteristics of items held in inventory. 
D)  this method requires detailed bookkeeping. 
A)  this is not the practice used by other car dealerships. 
B)  this method will overstate profit. 
C)  this method will not capture unique characteristics of items held in inventory. 
D)  this method requires detailed bookkeeping.

Question 11

When calculating cost of inventory AASB 102 requires which of the following costs are to be excluded?

Accepted Answer

A)  abnormal amounts of wasted materials 
B)  selling costs 
C)  administrative overheads 
D)  All of the given answers should be excluded. 
A)  abnormal amounts of wasted materials 
B)  selling costs 
C)  administrative overheads 
D)  All of the given answers should be excluded.

Question 12

The valuation of inventories may be on the basis of:

Accepted Answer

A)  the lower of direct cost and recoverable amount. 
B)  regular revaluations by classes of inventories undertaken at the end of the period. 
C)  the weighted average of market value and absorption cost over the period. 
D)  the lower of cost and net realisable value. 
A)  the lower of direct cost and recoverable amount. 
B)  regular revaluations by classes of inventories undertaken at the end of the period. 
C)  the weighted average of market value and absorption cost over the period. 
D)  the lower of cost and net realisable value.

Question 13

Balmoral Ltd commenced business on 1 July 2011.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 
A)  $58 950 
B)  $63 000 
C)  $49 500 
D)  $69 660

Question 14

What are the benefits of using LIFO method in jurisdictions where this inventory cost-flow assumption is permitted?

Accepted Answer

The Last-In, First-Out (LIFO) method is

Question 15

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. 
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.

Exam 7: Inventory

What is the implication on valuation of work-in-progress inventories when the net realisable value is lower than the carrying amount of the asset?

AASB 102 requires that the specific identification method of assigning cost to items of inventory be applied:

Fixed production costs are those that,within normal operating limits:

The definition of inventories includes assets in the form of materials or supplies to be consumed in the production process or in rendering of services.

Consistent with positive accounting theory,an entity close to breaching their debt covenant will:

Discuss when a standard cost may be used to arrive at the cost of inventory.

Some biological assets may be covered by AASB 102 Inventories.

Las Vegas Ltd sells second hand luxury cars of various makes and models,and uses the FIFO cost flow assumption to ascertain the cost of ending inventory.This would be incorrect because:

When calculating cost of inventory AASB 102 requires which of the following costs are to be excluded?

The valuation of inventories may be on the basis of:

What are the benefits of using LIFO method in jurisdictions where this inventory cost-flow assumption is permitted?

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