Question 1

In a context of rising costs,income reported under FIFO is:

Accepted Answer

A)  Higher than under LIFO or WAC. 
B)  Lower than under LIFO or WAC. 
C)  The same as under LIFO or WAC. 
D)  Sometimes higher,sometimes lower than under LIFO or WAC. 
A)  Higher than under LIFO or WAC. 
B)  Lower than under LIFO or WAC. 
C)  The same as under LIFO or WAC. 
D)  Sometimes higher,sometimes lower than under LIFO or WAC. A

Question 2

Which of the following types of inventories is not common in a manufacturing activity?

Accepted Answer

A)  Raw materials 
B)  Merchandise 
C)  Semi finished goods 
D)  Work in progress 
A)  Raw materials 
B)  Merchandise 
C)  Semi finished goods 
D)  Work in progress B

Question 3

According to IAS 2,what should the cost of inventories comprise?

Accepted Answer

A)  Costs of purchase 
B)  Costs of conversion 
C)  Costs incurred in bringing the inventories to their present condition and location 
D)  All of the previous costs 
A)  Costs of purchase 
B)  Costs of conversion 
C)  Costs incurred in bringing the inventories to their present condition and location 
D)  All of the previous costs D

Question 4

Which of the following procedures does not exist for the valuation of inventory outflows?

Accepted Answer

A)  First-In,First-Out (FIFO) 
B)  Weighted average cost method (WA
C)  
C)  First-In,Last-Out (FILO) 
D)  Specific identification method 
A)  First-In,First-Out (FIFO) 
B)  Weighted average cost method (WA
C)  
C)  First-In,Last-Out (FILO) 
D)  Specific identification method

Question 5

In a perpetual inventory system,the fundamental inventory equation is: Beginning inventory + Purchases or additions - Withdrawals = Ending inventory.What is the unknown in this equation?

Accepted Answer

A)  Beginning inventory 
B)  Purchases or additions 
C)  Withdrawals 
D)  Ending inventory 
A)  Beginning inventory 
B)  Purchases or additions 
C)  Withdrawals 
D)  Ending inventory

Question 6

What is (are)the main reason(s)for not using LIFO?

Accepted Answer

A)  Inflation is very limited today in developed economies and there is often simultaneously inflation and deflation on different products or resources thus the reporting benefit of LIFO might not be significant. 
B)  With even a small inflation,the LIFO-based taxable income would be less than it would be under FIFO or WAC and,if there is deflation,LIFO might create larger swings in taxable income levels than would WAC or FIFO. 
C)  LIFO in periods of heavy inflation may lead to a negative valuation of an inventory that is physically real,thus giving less credibility to the balance sheet. 
D)  All of these 
A)  Inflation is very limited today in developed economies and there is often simultaneously inflation and deflation on different products or resources thus the reporting benefit of LIFO might not be significant. 
B)  With even a small inflation,the LIFO-based taxable income would be less than it would be under FIFO or WAC and,if there is deflation,LIFO might create larger swings in taxable income levels than would WAC or FIFO. 
C)  LIFO in periods of heavy inflation may lead to a negative valuation of an inventory that is physically real,thus giving less credibility to the balance sheet. 
D)  All of these

Question 7

Which method is used where the items carried in inventory are not fungible?

Accepted Answer

A)  Perpetual inventory 
B)  Periodic inventory 
C)  Specific identification method 
D)  None of these 
A)  Perpetual inventory 
B)  Periodic inventory 
C)  Specific identification method 
D)  None of these

Question 8

Any cost that does not flow to the income statement by way of a cascade of inventory accounts is recognized in the period incurred and is thus called a 'product cost'.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements is not correct?

Accepted Answer

A)  Contract in progress can legitimately represent large amounts. 
B)  Contract in progress measures the amount of resources consumed in realizing all or part of a long-term contract but for which no invoicing has been issued to the customer. 
C)  As soon as an invoice is issued,all corresponding resources are carried,as depreciation expense,to the income statement. 
D)  If invoicing on contract takes place,for example,every four months,up to the cost of four months of production may be listed under contract in progress. 
A)  Contract in progress can legitimately represent large amounts. 
B)  Contract in progress measures the amount of resources consumed in realizing all or part of a long-term contract but for which no invoicing has been issued to the customer. 
C)  As soon as an invoice is issued,all corresponding resources are carried,as depreciation expense,to the income statement. 
D)  If invoicing on contract takes place,for example,every four months,up to the cost of four months of production may be listed under contract in progress.

Question 10

Given the above data,what is the amount of the ending inventory under LIFO?

Accepted Answer

A)  60 
B)  50 
C)  55 
D)  65 
A)  60 
B)  50 
C)  55 
D)  65

Question 11

What is the rule,which requires a business to realign the books when it finds itself in a situation where the book value of inventory is greater than its market value?

Accepted Answer

A)  The rule of 'lower of cost or market' 
B)  The rule of market to book 
C)  The rule of 'higher of cost or market' 
D)  None of these 
A)  The rule of 'lower of cost or market' 
B)  The rule of market to book 
C)  The rule of 'higher of cost or market' 
D)  None of these

Question 12

In which of the following industries would you expect the weight of inventories to be the greater?

Accepted Answer

A)  Computer industry 
B)  Textile industry 
C)  Home and personal care industry 
D)  Media industry 
A)  Computer industry 
B)  Textile industry 
C)  Home and personal care industry 
D)  Media industry

Question 13

In a periodic inventory system,the fundamental inventory equation is: Beginning inventory + Purchases or additions - Consumption = Ending inventory.What is the unknown in this equation?

Accepted Answer

A)  Beginning inventory 
B)  Purchases or additions 
C)  Consumption 
D)  Ending inventory 
A)  Beginning inventory 
B)  Purchases or additions 
C)  Consumption 
D)  Ending inventory

Question 14

Which of the following equations is correct?

Accepted Answer

A)  Beginning inventory - Purchases - Cost of goods sold = Ending inventory 
B)  Beginning inventory - Purchases + Cost of goods sold = Ending inventory 
C)  Beginning inventory + Purchases + Cost of goods sold = Ending inventory 
D)  Beginning inventory + Purchases - Cost of goods sold = Ending inventory 
A)  Beginning inventory - Purchases - Cost of goods sold = Ending inventory 
B)  Beginning inventory - Purchases + Cost of goods sold = Ending inventory 
C)  Beginning inventory + Purchases + Cost of goods sold = Ending inventory 
D)  Beginning inventory + Purchases - Cost of goods sold = Ending inventory

Question 15

Work in progress measures the value of the resources attached to items that are still left in the process of production on the closing date.

Accepted Answer

A) True 
 B)False

Question 16

For which reason(s)may the inventory at the end of the year be worth less than its value shown in the books?

Accepted Answer

A)  Decline in replacement prices 
B)  Physical deterioration 
C)  Obsolescence 
D)  All of these 
A)  Decline in replacement prices 
B)  Physical deterioration 
C)  Obsolescence 
D)  All of these

Question 17

To a manager whose responsibility it is to allocate resources in order to manage a product and customer portfolios,the most important element is the value of:

Accepted Answer

A)  The cost of goods sold. 
B)  The inventory. 
C)  The provision for depreciation of inventories. 
D)  None of these. 
A)  The cost of goods sold. 
B)  The inventory. 
C)  The provision for depreciation of inventories. 
D)  None of these.

Question 18

According to IAS 2,which of the following pieces of information should be given in the notes of the financial statements?

Accepted Answer

A)  Accounting policies adopted in measuring inventories,including the cost formula used. 
B)  Circumstances or events that led to the reversal of a write-down of inventories. 
C)  Carrying amount of inventories pledged as security for liabilities. 
D)  All of these 
A)  Accounting policies adopted in measuring inventories,including the cost formula used. 
B)  Circumstances or events that led to the reversal of a write-down of inventories. 
C)  Carrying amount of inventories pledged as security for liabilities. 
D)  All of these

Question 19

The periodic inventory system relies on periodic physical counting.

Accepted Answer

A) True 
 B)False

Question 20

Given the above data,what is the amount of the ending inventory under FIFO?

Accepted Answer

A)  60 
B)  50 
C)  55 
D)  65 
A)  60 
B)  50 
C)  55 
D)  65

In a context of rising costs,income reported under FIFO is:

Which of the following types of inventories is not common in a manufacturing activity?

According to IAS 2,what should the cost of inventories comprise?

Which of the following procedures does not exist for the valuation of inventory outflows?

In a perpetual inventory system,the fundamental inventory equation is: Beginning inventory + Purchases or additions - Withdrawals = Ending inventory.What is the unknown in this equation?

What is (are)the main reason(s)for not using LIFO?

Which method is used where the items carried in inventory are not fungible?

Any cost that does not flow to the income statement by way of a cascade of inventory accounts is recognized in the period incurred and is thus called a 'product cost'.

Which of the following statements is not correct?

Given the above data,what is the amount of the ending inventory under LIFO?

What is the rule,which requires a business to realign the books when it finds itself in a situation where the book value of inventory is greater than its market value?

In which of the following industries would you expect the weight of inventories to be the greater?

In a periodic inventory system,the fundamental inventory equation is: Beginning inventory + Purchases or additions - Consumption = Ending inventory.What is the unknown in this equation?

Which of the following equations is correct?

Work in progress measures the value of the resources attached to items that are still left in the process of production on the closing date.

For which reason(s)may the inventory at the end of the year be worth less than its value shown in the books?

To a manager whose responsibility it is to allocate resources in order to manage a product and customer portfolios,the most important element is the value of:

According to IAS 2,which of the following pieces of information should be given in the notes of the financial statements?

The periodic inventory system relies on periodic physical counting.

Given the above data,what is the amount of the ending inventory under FIFO?

Accounting: the Language of Business

Introduction to Financial Statements

Financial Statements: Interrelations and Construction

Accounting Principles and End-Of-Period Adjustments

Regulation of Accounting and Financial Reporting

Revenue Recognition Issues

Tangible Fixed Assets

Intangible Assets

Financial Instruments in the Statement of Financial Position and Fair Value Accounting

Shareholders Equity

Liabilities and Provisions

Business Combinations

Income Statement Analysis

Balance Sheet Analysis

Statement of Cash Flows Construction

Statement of Cash Flows Analysis and Earnings Quality

Ratio Analysis, financial Analysis and Beyond

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Exam 9: Inventories

In a context of rising costs,income reported under FIFO is:

Which of the following types of inventories is not common in a manufacturing activity?

According to IAS 2,what should the cost of inventories comprise?

Which of the following procedures does not exist for the valuation of inventory outflows?

In a perpetual inventory system,the fundamental inventory equation is: Beginning inventory + Purchases or additions - Withdrawals = Ending inventory.What is the unknown in this equation?

What is (are)the main reason(s)for not using LIFO?

Which method is used where the items carried in inventory are not fungible?

Any cost that does not flow to the income statement by way of a cascade of inventory accounts is recognized in the period incurred and is thus called a 'product cost'.

Which of the following statements is not correct?

Given the above data,what is the amount of the ending inventory under LIFO?

What is the rule,which requires a business to realign the books when it finds itself in a situation where the book value of inventory is greater than its market value?

In which of the following industries would you expect the weight of inventories to be the greater?

In a periodic inventory system,the fundamental inventory equation is: Beginning inventory + Purchases or additions - Consumption = Ending inventory.What is the unknown in this equation?

Which of the following equations is correct?

Work in progress measures the value of the resources attached to items that are still left in the process of production on the closing date.

For which reason(s)may the inventory at the end of the year be worth less than its value shown in the books?

To a manager whose responsibility it is to allocate resources in order to manage a product and customer portfolios,the most important element is the value of:

According to IAS 2,which of the following pieces of information should be given in the notes of the financial statements?

The periodic inventory system relies on periodic physical counting.

Given the above data,what is the amount of the ending inventory under FIFO?

Accounting: the Language of Business

Introduction to Financial Statements

Financial Statements: Interrelations and Construction

Accounting Principles and End-Of-Period Adjustments

Regulation of Accounting and Financial Reporting

Revenue Recognition Issues

Tangible Fixed Assets

Intangible Assets

Financial Instruments in the Statement of Financial Position and Fair Value Accounting

Shareholders Equity

Liabilities and Provisions

Business Combinations

Income Statement Analysis

Balance Sheet Analysis

Statement of Cash Flows Construction

Statement of Cash Flows Analysis and Earnings Quality

Ratio Analysis, financial Analysis and Beyond

Filters