Exam 7: Inventory

Rectangle 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 goods sold and the value of ending inventory for Rectangle Ltd assuming the LIFO cost-flow assumption is used?

According to AASB 102 inventories include assets:

Bondi Ltd is a small sports 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?

Standard costs may be used to arrive at the cost of inventory only where standards are set at ideal levels and any costs arising from exceptional wastage are excluded from the cost of inventories:

In times of rising prices for inventory,which of the following is true?

Under AASB 102 revaluations are permitteD.

Which of the following statements is correct with respect to positive accounting theory?

AASB 102 requires among others disclosure of which information:

In periods where production costs or purchase prices of inventory items do not change,it does not matter which inventory method is adopted as this would generate the same value for cost of goods sold and ending inventory.

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: 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?

Digitoll Ltd produces a range of computer accessories.One product is a web-cam,a miniature digital camera with the capacity to be linked to a computer.The following are the summary costs for the web-cam for the period ended 31 December 2002: The production level this period was normal at 10,000 units.What is the cost per unit (rounded to the nearest cent)in accordance with AASB 102 requirements?

FIFO method is an income decreasing inventory cost flow method in periods of rising prices.

Use of the LIFO method has been deemed unacceptable under AASB 102 because?

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 weighted average cost-flow assumption?

Kensington Ltd is an importer and retailer of European made glass crystals.For the year ended 30 June 2008,Kensington Ltd still holds 30 units of an item originally purchased for $10,000 each and a net realisable value of $8,000.On 1 June 2009 the TV show "Home Improvement" featured a similar item prompting an increase in demand for this glass crystal.Management believes that the net realisable value of this item is now $15,000.All 30 items remain unsold on 30 June 2009.What is the effect of holding this inventory on the income statement of Heffron Ltd for the years ended 30 June 2008 and 2009?

The cost of sub-contracted work is not included in costs of conversion for the purposes of calculating the cost of inventory:

Video Productions Ltd commenced business manufacturing video tapes on 1 July 2002.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?

AASB 102 requires that the specific identification method of assigning cost to items of inventory be applieD.

David Gordon is an accountant for Bronte Ltd.At the end of the year he realised that ending inventory was overstated but the purchases account was recorded correctly.What is the effect of above error in the income statement and balance sheet (inventory)accounts of Bronte Ltd?

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: