Question 1

If the selling price of inventory that has been written down to net realisable value in a prior period, subsequently recovers, the:

Accepted Answer

A)  previous amount of the write-down can be reversed; 
B)  carrying amount of the inventory cannot be adjusted; 
C)  value adjustment can be recognised immediately in equity; 
D)  adjustment must be recognised in a 'provision for future inventory write-downs' account. 
A)  previous amount of the write-down can be reversed; 
B)  carrying amount of the inventory cannot be adjusted; 
C)  value adjustment can be recognised immediately in equity; 
D)  adjustment must be recognised in a 'provision for future inventory write-downs' account. A

Question 2

Under AASB 102 Inventories, items of inventory that are used by business enterprise as components in a self-constructed property asset are required to be:

Accepted Answer

A)  aggregated into the 'cost of goods sold' expense in the period in which the items are used; 
B)  expensed directly into equity in the period in which the items are used; 
C)  capitalised and depreciated; 
D)  added to a 'property construction' provision account. 
A)  aggregated into the 'cost of goods sold' expense in the period in which the items are used; 
B)  expensed directly into equity in the period in which the items are used; 
C)  capitalised and depreciated; 
D)  added to a 'property construction' provision account. C

Question 3

Net realisable value of inventories may fall below cost for a number of reasons including:
I Product obsolescence.
II Physical deterioration of inventories.
III An increase in the expected replacement costs of the inventory,
IV An increase in the estimated costs of completion.

Accepted Answer

A)  I, II and IV only; 
B)  I, III and IV only; 
C)  II, III and IV only; 
D)  I and II only. 
A)  I, II and IV only; 
B)  I, III and IV only; 
C)  II, III and IV only; 
D)  I and II only. A

Question 4

When an entity's operating cycle is not clearly identifiable it is assumed to be:

Accepted Answer

A)  three months; 
B)  six months; 
C)  nine months; 
D)  12 months. 
A)  three months; 
B)  six months; 
C)  nine months; 
D)  12 months.

Question 5

Which of the following statements is correct?

Accepted Answer

A)  The periodic method of accounting for inventory will always result in a higher closing inventory balance than the perpetual method. 
B)  The periodic method of accounting for inventory will always result in a lower closing inventory balance than the perpetual method. 
C)  Closing inventory will always be the same under the periodic and perpetual methods. 
D)  the relationship between the closing inventory balance under the periodic and perpetual methods will depend on whether the FIFO or weighted average method is used to value inventory. 
A)  The periodic method of accounting for inventory will always result in a higher closing inventory balance than the perpetual method. 
B)  The periodic method of accounting for inventory will always result in a lower closing inventory balance than the perpetual method. 
C)  Closing inventory will always be the same under the periodic and perpetual methods. 
D)  the relationship between the closing inventory balance under the periodic and perpetual methods will depend on whether the FIFO or weighted average method is used to value inventory.

Question 6

AASB 102 prohibits which of the following from being included in the cost of inventory?

Accepted Answer

A)  trade discounts received 
B)  freight (where the terms of sale are FOB destination) 
C)  production overheads 
D)  import duties 
A)  trade discounts received 
B)  freight (where the terms of sale are FOB destination) 
C)  production overheads 
D)  import duties

Question 7

Under the periodic inventory approach the cost of goods sold during a period is determined as follows:

Accepted Answer

A)  beginning inventory + net purchases - ending inventory; 
B)  beginning inventory - net purchases - ending inventory; 
C)  opening inventory + net purchases + closing inventory; 
D)  opening inventory - net purchases + closing inventory. 
A)  beginning inventory + net purchases - ending inventory; 
B)  beginning inventory - net purchases - ending inventory; 
C)  opening inventory + net purchases + closing inventory; 
D)  opening inventory - net purchases + closing inventory.

Question 8

Which of the following is not recognised as an expense in accordance with AASB 102?

Accepted Answer

A)  Cost of goods sold 
B)  Write-downs of inventories to net realisable value 
C)  Reversal of write downs to net realisable value 
D)  Inventory items used by an entity as components in self-constructed property, plant or equipment. 
A)  Cost of goods sold 
B)  Write-downs of inventories to net realisable value 
C)  Reversal of write downs to net realisable value 
D)  Inventory items used by an entity as components in self-constructed property, plant or equipment.

Question 9

The terms '2/7' appearing on an invoice for the sale/purchase of inventory means that the buyer:

Accepted Answer

A)  will receive a 2% discount if paid within 7 days of the invoice date; 
B)  will receive a 7% discount if paid within 2 days of the invoice date; 
C)  has 7 days from the invoice date to pay or will be charged a 2% surcharge; 
D)  has 2 days from the invoice date to pay or will be charged a 7% surcharge. 
A)  will receive a 2% discount if paid within 7 days of the invoice date; 
B)  will receive a 7% discount if paid within 2 days of the invoice date; 
C)  has 7 days from the invoice date to pay or will be charged a 2% surcharge; 
D)  has 2 days from the invoice date to pay or will be charged a 7% surcharge.

Question 10

Taxes may be included in the costs of inventory unless they are:

Accepted Answer

A)  levied on the entity by a foreign government; 
B)  in respect to the raw materials component of manufactured inventory; 
C)  recoverable by the entity from the taxing authority; 
D)  in the nature of import duties. 
A)  levied on the entity by a foreign government; 
B)  in respect to the raw materials component of manufactured inventory; 
C)  recoverable by the entity from the taxing authority; 
D)  in the nature of import duties.

Question 11

Stock take discrepancies between a count sheet and recorded quantities in the ledger may arise due to:
I Theft of stock during the year
II Stock purchased under FOB destination terms being in transit at period end
III A consignee including consignment stock in their physical count.
IV Sales returns not being processed into the ledger

Accepted Answer

A)  I, II and III 
B)  II, III and IV 
C)  I, III and IV 
D)  I, II and IV 
A)  I, II and III 
B)  II, III and IV 
C)  I, III and IV 
D)  I, II and IV

Question 12

AASB 102 requires disclosure of the following:
I$\quad$ Details of reversals of prior year write-downs
II $\quad$Separate disclosure of the caryying amount of inventories carried at 
$\quad$$\quad$cost and those carried at net realisable value
III$\quad$ The accounting policy adopted by the entity in relation to inventory valuation 
IV$\quad$ The carrying amount of inventory by class

Accepted Answer

A)  II and III only 
B)  I, II and III only 
C)  II, III and IV only 
D)  I, II, III and IV 
A)  II and III only 
B)  I, II and III only 
C)  II, III and IV only 
D)  I, II, III and IV

Question 13

When determining the net realisable value of inventory, estimates must be made of the following:
I Estimated costs of completion (if any).
II Expected replacement cost.
III Expected selling price.
IV Estimated selling costs.

Accepted Answer

A)  I, II, III and IV; 
B)  I, II and III only; 
C)  II and IV only; 
D)  I, III and IV only. 
A)  I, II, III and IV; 
B)  I, II and III only; 
C)  II and IV only; 
D)  I, III and IV only.

Question 14

Where the net realisable value of inventory falls below cost, AASB 102 Inventories, requires that:

Accepted Answer

A)  the inventory continue to be carried in the Statement of Financial Position at cost; 
B)  the inventory be written down to net realisable value; 
C)  no adjustment be made, but the difference between net realisable value and cost be disclosed in the notes to the financial statements; 
D)  the difference be added to the carrying amount of the inventory. 
A)  the inventory continue to be carried in the Statement of Financial Position at cost; 
B)  the inventory be written down to net realisable value; 
C)  no adjustment be made, but the difference between net realisable value and cost be disclosed in the notes to the financial statements; 
D)  the difference be added to the carrying amount of the inventory.

Question 15

Under the periodic inventory approach an appropriate journal entry to measure closing inventory is:

Accepted Answer

A) 
DR Opening inventory (cost of goods sold expense) CR Inventory (asset); 
B)  
DR Purchases (expense) CR Inventory (asset); 
C)  
DR Inventory (asset)
CR Closing inventory (cost of goods sold expense); 
D) 
DR Purchases returns (cost of goods sold expense) CR Inventory (asset). 
A) 
DR Opening inventory (cost of goods sold expense) CR Inventory (asset); 
B)  
DR Purchases (expense) CR Inventory (asset); 
C)  
DR Inventory (asset)
CR Closing inventory (cost of goods sold expense); 
D) 
DR Purchases returns (cost of goods sold expense) CR Inventory (asset).

Question 16

The measurement rule for inventories, mandated by AASB 102 Inventories, is:

Accepted Answer

A)  lower of fair value and selling price; 
B)  lower of cost and net realisable value; 
C)  higher of initial cost and realisable value; 
D)  higher of completion costs and replacement costs. 
A)  lower of fair value and selling price; 
B)  lower of cost and net realisable value; 
C)  higher of initial cost and realisable value; 
D)  higher of completion costs and replacement costs.

Question 17

Duo Ltd uses a periodic inventory system and rounds the average unit cost to the nearest dollar. The following data relates to Duo Ltd for the year ended 30 June 2013:
Opening inventory 15 units @ average cost of $25 each
January purchases 10 units @ $24 each
July purchases 25 units @ $26 each
October purchases 20 units @ $24 each
Ending inventory 20 units
The cost of ending inventory using the weighted average cost method (rounded to the nearest dollar) is:

Accepted Answer

A)  $459 
B)  $465 
C)  $499 
D)  $483 
A)  $459 
B)  $465 
C)  $499 
D)  $483

Question 18

AASB 102 allows which of the following to be capitalised into the cost of inventory?

Accepted Answer

A)  storage costs for finished goods 
B)  selling costs 
C)  normal wastage costs 
D)  administrative overheads 
A)  storage costs for finished goods 
B)  selling costs 
C)  normal wastage costs 
D)  administrative overheads

Question 19

AASB 102 requires separate disclosure of:

Accepted Answer

A)  where there has been abnormal wastage which has been expensed 
B)  details of inventory pledged as security for loans 
C)  interest costs which have been capitalised into the cost of inventory 
D)  details of key terms of purchase 
A)  where there has been abnormal wastage which has been expensed 
B)  details of inventory pledged as security for loans 
C)  interest costs which have been capitalised into the cost of inventory 
D)  details of key terms of purchase

Question 20

Ming Limited had the following items of inventory at reporting date:
$\begin{array}{lccc}\text { Item } & \text { Quantity } & \text { Cost/unit \$ } & \text { NRV/unit } \
& & \$ & \$ \
\text { Refrigerators } & 10 & 100 & 95 \
\text { Stoves } & 20 & 80 & 85
\end{array}$
The adjustment necessary at reporting date is:

Accepted Answer

A)  DR Inventory $ 50; 
B)  DR Inventory $100; 
C)  CR Inventory $ 50; 
D)  CR Inventory $0. 
A)  DR Inventory $ 50; 
B)  DR Inventory $100; 
C)  CR Inventory $ 50; 
D)  CR Inventory $0.

Exam 12: Inventories

If the selling price of inventory that has been written down to net realisable value in a prior period, subsequently recovers, the:

Under AASB 102 Inventories, items of inventory that are used by business enterprise as components in a self-constructed property asset are required to be:

Net realisable value of inventories may fall below cost for a number of reasons including: I Product obsolescence. II Physical deterioration of inventories. III An increase in the expected replacement costs of the inventory, IV An increase in the estimated costs of completion.

When an entity's operating cycle is not clearly identifiable it is assumed to be:

Which of the following statements is correct?

AASB 102 prohibits which of the following from being included in the cost of inventory?

Under the periodic inventory approach the cost of goods sold during a period is determined as follows:

Which of the following is not recognised as an expense in accordance with AASB 102?

The terms '2/7' appearing on an invoice for the sale/purchase of inventory means that the buyer:

Taxes may be included in the costs of inventory unless they are:

When determining the net realisable value of inventory, estimates must be made of the following: I Estimated costs of completion (if any). II Expected replacement cost. III Expected selling price. IV Estimated selling costs.

Where the net realisable value of inventory falls below cost, AASB 102 Inventories, requires that:

Under the periodic inventory approach an appropriate journal entry to measure closing inventory is:

The measurement rule for inventories, mandated by AASB 102 Inventories, is:

AASB 102 allows which of the following to be capitalised into the cost of inventory?

AASB 102 requires separate disclosure of:

Ming Limited had the following items of inventory at reporting date: Item Quantity Cost/unit \ NRV/unit \ \ Refrigerators 10 100 95 Stoves 20 80 85 The adjustment necessary at reporting date is:

Accounting Regulation and the Conceptual Framework

Application of Accounting Theory

Shareholders Equity: Share Capital and Reserves

Fair Value Measurement

Revenue

Provisions, Contingent Liabilities and Contingent Assets

Income Taxes

Financial Instruments

Share-Based Payments

Translation of the Financial Statements of Foreign Entities

Employee Benefits

Property, Plant and Equipment

Leases

Understanding Australian Accounting Standards

Impairment of Assets

Accounting for Mineral Resources

Agriculture

Financial Statement Presentation

Statement of Cash Flows

Earnings Per Share

Operating Segments

Operating Segments

Business Combinations

Consolidation: Principles and Accounting Requirements

Consolidation: Intragroup Transactions

Consolidation: Non Controlling Interest

Joint Arrangements

Associates and Joint Ventures

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