Question 1

A physical stocktake is carried out:

Accepted Answer

A)  only under the periodic inventory system. 
B)  only under the perpetual inventory system. 
C)  under neither the periodic nor the perpetual systems. 
D)  under both the periodic and perpetual inventory systems. 
A)  only under the periodic inventory system. 
B)  only under the perpetual inventory system. 
C)  under neither the periodic nor the perpetual systems. 
D)  under both the periodic and perpetual inventory systems.

Question 2

Under the FIFO method sales returns are costed back into inventory at:

Accepted Answer

A)  an average cost price. 
B)  the most recent cost price attached to a sale. 
C)  a price determined by the accountant. 
D)  the original cost price that was attached to the original sale. 
A)  an average cost price. 
B)  the most recent cost price attached to a sale. 
C)  a price determined by the accountant. 
D)  the original cost price that was attached to the original sale.

Question 3

Which statement concerning inventory is incorrect?

Accepted Answer

A)  Consistency rules out ever switching to an alternative accounting method. 
B)  Consistency is an important consideration when alternative accounting methods exist. 
C)  Once an inventory costing method is selected management should not deliberately switch to another to manipulate profits. 
D)  Accounting data produced in different accounting periods is not comparable if arbitrary changes in accounting methods are permitted. 
A)  Consistency rules out ever switching to an alternative accounting method. 
B)  Consistency is an important consideration when alternative accounting methods exist. 
C)  Once an inventory costing method is selected management should not deliberately switch to another to manipulate profits. 
D)  Accounting data produced in different accounting periods is not comparable if arbitrary changes in accounting methods are permitted.

Question 4

In the event of rising inventory prices, the method of inventory valuation that gives the highest profit and the highest ending inventory is the:

Accepted Answer

A)  FIFO method. 
B)  LIFO method. 
C)  Weighted average. 
D)  Perpetual method. 
A)  FIFO method. 
B)  LIFO method. 
C)  Weighted average. 
D)  Perpetual method.

Question 5

All of the following statements about the presentation of inventory in financial reports are correct except for:

Accepted Answer

A)  The general basis of valuation should be shown,e.g. cost, NRV. 
B)  The assumption used to assign costs to inventory should be disclosed. 
C)  Inventory should be classified into its current and non-current components. 
D)  Inventory shown on the balance sheet should always be in a saleable condition. 
A)  The general basis of valuation should be shown,e.g. cost, NRV. 
B)  The assumption used to assign costs to inventory should be disclosed. 
C)  Inventory should be classified into its current and non-current components. 
D)  Inventory shown on the balance sheet should always be in a saleable condition.

Question 6

Under IAS 2/AASB 102 the costing method that is not permitted is:

Accepted Answer

A)  FIFO. 
B)  LIFO. 
C)  weighted/moving average. 
D)  specific identification. 
A)  FIFO. 
B)  LIFO. 
C)  weighted/moving average. 
D)  specific identification.

Question 7

Fabulous Furniture uses a periodic inventory system. Many purchases and sales of goods occur during the financial year. For Fabulous Furniture, the balance in the general ledger inventory account:

Accepted Answer

A)  will usually be zero except at a balance sheet date. 
B)  does not change until a stocktake is carried out. 
C)  represents the goods on hand at any given point in time. 
D)  reports the goods purchased since the beginning of the accounting period. 
A)  will usually be zero except at a balance sheet date. 
B)  does not change until a stocktake is carried out. 
C)  represents the goods on hand at any given point in time. 
D)  reports the goods purchased since the beginning of the accounting period.

Question 8

Which of the following statements concerning the perpetual inventory method is incorrect?

Accepted Answer

A)  A stocktake is required to estimate cost of sales. 
B)  Cost of sales is calculated for each transaction. 
C)  A continuous record is kept of all movements in inventory. 
D)  With the increased use of computers it has become the most common system. 
A)  A stocktake is required to estimate cost of sales. 
B)  Cost of sales is calculated for each transaction. 
C)  A continuous record is kept of all movements in inventory. 
D)  With the increased use of computers it has become the most common system.

Question 9

A business performing a physical count of inventory on hand is known as a:

Accepted Answer

A)  count. 
B)  stocklist. 
C)  stocktake. 
D)  stockvalue. 
A)  count. 
B)  stocklist. 
C)  stocktake. 
D)  stockvalue.

Question 10

Inventory is defined as goods held for resale in the ordinary course of business. Which of the following would not be included in inventory for any type of business?

Accepted Answer

A)  Furniture 
B)  Cash at bank 
C)  Work in process 
D)  Land held for resale 
A)  Furniture 
B)  Cash at bank 
C)  Work in process 
D)  Land held for resale

Question 11

If Michelle knows that the ending inventory at retail for her corner store is $22 000 and her cost to retail percentage is 45%, her ending inventory at cost can be estimated as:

Accepted Answer

A)  $9 900. 
B)  $12 100. 
C)  $31 900. 
D)  $40 000. 
A)  $9 900. 
B)  $12 100. 
C)  $31 900. 
D)  $40 000.

Question 12

With the perpetual method of accounting for inventory the first-in first-out assumption is applied to:

Accepted Answer

A)  inventory at the end of the month. 
B)  cost of sales at the end of the month. 
C)  cost of sales at the end of the accounting year. 
D)  each sale via stock cards or computer records. 
A)  inventory at the end of the month. 
B)  cost of sales at the end of the month. 
C)  cost of sales at the end of the accounting year. 
D)  each sale via stock cards or computer records.

Question 13

The formula, cost of sales/average inventory, measures the:

Accepted Answer

A)  gross profit ratio. 
B)  number of times, on average, that inventory is turned over per year. 
C)  mark-up on inventory expressed as a percentage of the cost price. 
D)  mark-up on inventory expressed as a percentage of the selling price. 
A)  gross profit ratio. 
B)  number of times, on average, that inventory is turned over per year. 
C)  mark-up on inventory expressed as a percentage of the cost price. 
D)  mark-up on inventory expressed as a percentage of the selling price.

Question 14

Which of the following statements concerning the retail inventory method of estimating closing stock is incorrect?

Accepted Answer

A)  It can be applied with or without a physical stocktake being carried out. 
B)  A stocktake is carried out, valued at retail and then converted to cost by applying the historical gross profit percentage. 
C)  The ratio of cost to retail is goods available for sale at cost divided by the goods available for sale at retail. 
D)  Differences in the mix of inventory compared to the mix used to determine the cost ratio does not affect the accuracy of the method. 
A)  It can be applied with or without a physical stocktake being carried out. 
B)  A stocktake is carried out, valued at retail and then converted to cost by applying the historical gross profit percentage. 
C)  The ratio of cost to retail is goods available for sale at cost divided by the goods available for sale at retail. 
D)  Differences in the mix of inventory compared to the mix used to determine the cost ratio does not affect the accuracy of the method.

Question 15

With the perpetual method of accounting for inventory, the costing assumption, such as first-in first-out, is applied to:

Accepted Answer

A)  inventory at the end of the month. 
B)  cost of sales at the end of the accounting year. 
C)  each sale via stock cards or computer records. 
D)  the current asset inventory in the balance sheet. 
A)  inventory at the end of the month. 
B)  cost of sales at the end of the accounting year. 
C)  each sale via stock cards or computer records. 
D)  the current asset inventory in the balance sheet.

Question 16

Blueberry Ltd uses the FIFO assumption with the periodic inventory method.
$\begin{array}{lrrr} 
& \text { Units } & \text { Unit Cost } \$ & \text { Total Cost } \$ \
\text { Beginning Inventory } & 8 & 12 & 96 \
\text { Purchases } & 15 & 14 & 210 \
\text { Purchases } & 23 & 15 & 345
\end{array}$
Sales during year were 18 units. The value of closing stock at the end of the period is:

Accepted Answer

A)  $236 
B)  $336 
C)  $415 
D)  $651 
A)  $236 
B)  $336 
C)  $415 
D)  $651

Question 17

Which of the following statements relating to the periodic inventory system is incorrect?

Accepted Answer

A)  Inventory purchases are recorded in the Purchases account. 
B)  The balance in the Inventory account represents the cost of the inventory on hand at the beginning of the period. 
C)  The Inventory account is classified as a non-current asset. 
D)  A stocktake must be performed to determine the ending inventory balance. 
A)  Inventory purchases are recorded in the Purchases account. 
B)  The balance in the Inventory account represents the cost of the inventory on hand at the beginning of the period. 
C)  The Inventory account is classified as a non-current asset. 
D)  A stocktake must be performed to determine the ending inventory balance.

Question 18

If inventory costs are decreasing, profit will be highest if the inventory method used is:

Accepted Answer

A)  FIFO. 
B)  LIFO. 
C)  weighted average. 
D)  It is not possible to answer the question. 
A)  FIFO. 
B)  LIFO. 
C)  weighted average. 
D)  It is not possible to answer the question.

Question 19

The main aspect of the perpetual method of accounting for inventory is:

Accepted Answer

A)  a stocktake is performed. 
B)  it is useful for high value, low volume items. 
C)  cost of sales is calculated at the end of the accounting period. 
D)  all movements in each item of stock are tracked via detailed inventory records. 
A)  a stocktake is performed. 
B)  it is useful for high value, low volume items. 
C)  cost of sales is calculated at the end of the accounting period. 
D)  all movements in each item of stock are tracked via detailed inventory records.

Question 20

Which of the following is a disadvantage to business of the LIFO method of applying costs to inventory?

Accepted Answer

A)  It is difficult for a computer program to apply the method. 
B)  It understates the balance sheet value for inventory. 
C)  Current income is matched with the most recent costs of acquiring goods. 
D)  If it is allowed for tax purposes, in times of rising prices it results in less tax being paid in the current period. 
A)  It is difficult for a computer program to apply the method. 
B)  It understates the balance sheet value for inventory. 
C)  Current income is matched with the most recent costs of acquiring goods. 
D)  If it is allowed for tax purposes, in times of rising prices it results in less tax being paid in the current period.

Exam 13: Inventories

A physical stocktake is carried out:

Under the FIFO method sales returns are costed back into inventory at:

Which statement concerning inventory is incorrect?

In the event of rising inventory prices, the method of inventory valuation that gives the highest profit and the highest ending inventory is the:

All of the following statements about the presentation of inventory in financial reports are correct except for:

Under IAS 2/AASB 102 the costing method that is not permitted is:

Fabulous Furniture uses a periodic inventory system. Many purchases and sales of goods occur during the financial year. For Fabulous Furniture, the balance in the general ledger inventory account:

Which of the following statements concerning the perpetual inventory method is incorrect?

A business performing a physical count of inventory on hand is known as a:

Inventory is defined as goods held for resale in the ordinary course of business. Which of the following would not be included in inventory for any type of business?

If Michelle knows that the ending inventory at retail for her corner store is $22 000 and her cost to retail percentage is 45%, her ending inventory at cost can be estimated as:

With the perpetual method of accounting for inventory the first-in first-out assumption is applied to:

The formula, cost of sales/average inventory, measures the:

Which of the following statements concerning the retail inventory method of estimating closing stock is incorrect?

With the perpetual method of accounting for inventory, the costing assumption, such as first-in first-out, is applied to:

Blueberry Ltd uses the FIFO assumption with the periodic inventory method. Units Unit Cost \ Total Cost \ Beginning Inventory 8 12 96 Purchases 15 14 210 Purchases 23 15 345 Sales during year were 18 units. The value of closing stock at the end of the period is:

Which of the following statements relating to the periodic inventory system is incorrect?

If inventory costs are decreasing, profit will be highest if the inventory method used is:

The main aspect of the perpetual method of accounting for inventory is:

Which of the following is a disadvantage to business of the LIFO method of applying costs to inventory?

Decision Making and the Role of Accounting

Financial Statements for Decision Making

Recording Transactions

Adjusting the Accounts and Preparing Financial Statements

Completing the Accounting Cycle Closing and Reversing Entries

Accounting for Retailing

Accounting for Systems

Partnerships: Formation, Operation and Reporting

Companies: Formation and Operations

Regulation and the Conceptual Framework

Cash Management and Control

Receivables

Non-Current Assets: Acquisition and Depreciation

Non-Current Assets: Revaluation, Disposal and Other Aspects

Liabilities

Presentation of Financial Statements

Statement of Cash Flows

Analysis and Interpretation of Financial Statements

Accounting for Manufacturing

Cost Accounting Systems

Cost-Volume-Profit Analysis for Decision Making

Budgeting for Planning and Control

Performance Evaluation for Managers

Differential Analysis, Profitability Analysis and Capital Budgeting

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