Question 1

AASB 102 provides that not-for-profit entities:

Accepted Answer

A)  Must value their assets at the lower of cost or net realisable value to allow reports to be compared. 
B)  Should only report inventories at cost for simplicity. 
C)  Should value their assets at either cost or current replacement cost, whichever is more beneficial. 
D)  Will record the inventories at the lower of cost or current replacement cost. 
E)  None of the given answers. 
A)  Must value their assets at the lower of cost or net realisable value to allow reports to be compared. 
B)  Should only report inventories at cost for simplicity. 
C)  Should value their assets at either cost or current replacement cost, whichever is more beneficial. 
D)  Will record the inventories at the lower of cost or current replacement cost. 
E)  None of the given answers. D

Question 2

A company engaged in buying and selling equity securities should consider this asset as inventory and should be accounted for in accordance with AASB 102.

Accepted Answer

A) True 
 B)False  False

Question 3

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  True

Question 4

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 5

In addition to the cost-flow assumption,the system used to record movements in inventory also affects the determination of the cost of inventory.What are the systems commonly in use for recording the movement of inventory?

Accepted Answer

A)  Continuous and cyclic. 
B)  ABC costing and overhead allocation. 
C)  Positive and periodic. 
D)  Periodic and perpetual. 
E)  None of the given answers. 
A)  Continuous and cyclic. 
B)  ABC costing and overhead allocation. 
C)  Positive and periodic. 
D)  Periodic and perpetual. 
E)  None of the given answers.

Question 6

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. 
E)  None of the given answers. 
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. 
E)  None of the given answers.

Question 7

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)  The deduction of relevant rebates and subsidies. 
E)  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)  The deduction of relevant rebates and subsidies. 
E)  All of the given answers.

Question 8

AASB 102 "Inventories" applies to biological assets related to agricultural activity.

Accepted Answer

A) True 
 B)False

Question 9

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. 
E)  None of the given answers. 
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. 
E)  None of the given answers.

Question 10

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 2003.   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: $3,460.40 Ending inventory: $380.00 
B)  Cost of sales: $3,453.90 Ending inventory: $386.50 
C)  Cost of sales: $3,459.41 Ending inventory: $380.99 
D)  Cost of sales: $3,453.90 Ending inventory: $393.75 
E)  None of the given answers. 
A)  Cost of sales: $3,460.40 Ending inventory: $380.00 
B)  Cost of sales: $3,453.90 Ending inventory: $386.50 
C)  Cost of sales: $3,459.41 Ending inventory: $380.99 
D)  Cost of sales: $3,453.90 Ending inventory: $393.75 
E)  None of the given answers.

Question 11

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. 
E)  All of the given answers. 
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. 
E)  All of the given answers.

Question 12

Big Games for Big Kids sell a variety of gaming consoles and games.It 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 November with 50 units on hand valued at $1,500.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.   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 
E)  Cannot be determined from the above information. 
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 
E)  Cannot be determined from the above information.

Question 13

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. 
E)  All of the given answers. 
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. 
E)  All of the given answers.

Question 14

AASB 102 provides that inventories must be valued at the lower of cost and net realisable value for groups of homogeneous items where it is impracticable to measure them on an item-by-item basis:

Accepted Answer

A) True 
 B)False

Question 15

The two main methods for dealing with fixed costs in relation to the production of inventory are:

Accepted Answer

A)  Variable costing and incremental costing. 
B)  Absorption costing and direct costing. 
C)  Overhead costing and ABC costing. 
D)  Relevant costing and incremental costing. 
E)  None of the given answers. 
A)  Variable costing and incremental costing. 
B)  Absorption costing and direct costing. 
C)  Overhead costing and ABC costing. 
D)  Relevant costing and incremental costing. 
E)  None of the given answers.

Question 16

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 17

AASB 102 requires that inventory is valued at:

Accepted Answer

A)  The lower of cost and recoverable value, on an item-by-item basis where practicable. 
B)  Cost or fair value for classes of assets and services that are defined as inventories. 
C)  The lower of cost and net realisable value, on an item-by-item basis where practicable. 
D)  Cost or deprival value, whichever is the lower, for classes of inventories. 
E)  None of the given answers. 
A)  The lower of cost and recoverable value, on an item-by-item basis where practicable. 
B)  Cost or fair value for classes of assets and services that are defined as inventories. 
C)  The lower of cost and net realisable value, on an item-by-item basis where practicable. 
D)  Cost or deprival value, whichever is the lower, for classes of inventories. 
E)  None of the given answers.

Question 18

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. 
E)  None of the given answers. 
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. 
E)  None of the given answers.

Question 19

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)  All of the given answers. 
E)  None 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)  All of the given answers. 
E)  None of the given answers.

Question 20

AASB 102 requires that fixed manufacturing costs be excluded from the cost of inventories,as they cannot be allocated accurately:

Accepted Answer

A) True 
 B)False

Exam 7: Inventory

AASB 102 provides that not-for-profit entities:

A company engaged in buying and selling equity securities should consider this asset as inventory and should be accounted for in accordance with AASB 102.

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

In addition to the cost-flow assumption,the system used to record movements in inventory also affects the determination of the cost of inventory.What are the systems commonly in use for recording the movement of inventory?

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

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

AASB 102 "Inventories" applies to biological assets related to agricultural activity.

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

Using the periodic system of inventory:

The valuation of inventories may be on the basis of:

AASB 102 provides that inventories must be valued at the lower of cost and net realisable value for groups of homogeneous items where it is impracticable to measure them on an item-by-item basis:

The two main methods for dealing with fixed costs in relation to the production of inventory are:

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

AASB 102 requires that inventory is valued at:

The periodic inventory system operates by:

AASB 102 on inventories does not apply to:

AASB 102 requires that fixed manufacturing costs be excluded from the cost of inventories,as they cannot be allocated accurately:

An Overview of the Australian External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financ

Theories of Financial Accounting

An Overview of Accounting for Assets

Depreciation of Property, plant and Equipment

Revaluation 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 Lease

Set-Off and Extinguishment of Debt

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 E

Accounting for Share-Based Payments

Accounting for Income Taxes

Cash-Flow Statements

Accounting for the Extractive Industries

Accounting for General Insurance Contracts

Accounting for Superannuation Plans

Events Occurring After Balance Sheet Date

Segment Reporting

Related-Party Disclosures

Earnings Per Share

Accounting for Group Structures

Further Consolidation Issues I: Accounting for Intragroup Transact

Further Consolidation Issues II: Accounting for Minority Interests

Further Consolidation Issues III: Accounting for Indirect Ownershi

Further Consolidation Issues Iv: Accounting for Changes in the Deg

Accounting for Equity Investments

Accounting for Equity Investments

Accounting for Foreign Currency Transactions

Translation of the Accounts of Foreign Operations

Accounting for Corporate Social Responsibility

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