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

Question 2

Which of these is not a possible source of error in calculating closing inventory?

Accepted Answer

A)  An incorrect cut-off between accounting periods. 
B)  Mistakes in counting during the stocktake. 
C)  Mistakes in the price at which the goods are sold to customers. 
D)  Mistakes in dealing with goods on consignment. 
A)  An incorrect cut-off between accounting periods. 
B)  Mistakes in counting during the stocktake. 
C)  Mistakes in the price at which the goods are sold to customers. 
D)  Mistakes in dealing with goods on consignment. C

Question 3

Nugyen Co purchased goods for $3500. While on display, the goods were damaged and it is estimated that they can now only be sold for $2000. Additional marketing and distribution costs are $100. The net realisable value of the goods is:

Accepted Answer

A)  $1900. 
B)  $2000. 
C)  $3500. 
D)  $3400. 
A)  $1900. 
B)  $2000. 
C)  $3500. 
D)  $3400. A

Question 4

The accounting standards governing determination of the cost of inventories are:

Accepted Answer

A)  IAS 2/AASB 102. 
B)  IAS 8/AASB 108. 
C)  IAS 13/AASB 108. 
D)  IAS 34/AASB 134. 
A)  IAS 2/AASB 102. 
B)  IAS 8/AASB 108. 
C)  IAS 13/AASB 108. 
D)  IAS 34/AASB 134.

Question 5

Montreal Furniture uses a periodic inventory system. During an accounting year many purchases and sales of goods occur. For Montreal, the balance in the general ledger inventory account:

Accepted Answer

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

Question 6

Accepted Answer

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

Question 7

Accepted Answer

A)  $16 900. 
B)  $17 500. 
C)  $19 500. 
D)  $21 000. 
A)  $16 900. 
B)  $17 500. 
C)  $19 500. 
D)  $21 000.

Question 8

Mikey uses a periodic inventory system and committed an error that understated inventory at the end of Year One. If no further errors occur, at the end of Year Two:

Accepted Answer

A)  profit is overstated; equity is overstated. 
B)  profit is overstated; equity is correct. 
C)  profit is understated; equity is understated. 
D)  profit is understated; equity is overstated. 
A)  profit is overstated; equity is overstated. 
B)  profit is overstated; equity is correct. 
C)  profit is understated; equity is understated. 
D)  profit is understated; equity is overstated.

Question 9

Which statement is untrue?

Accepted Answer

A)  Inventory is normally valued at cost. 
B)  In certain circumstances some inventory items will be valued at below cost. 
C)  In certain circumstances some inventory items will be valued at above cost. 
D)  Net realisable value is related to estimated market value. 
A)  Inventory is normally valued at cost. 
B)  In certain circumstances some inventory items will be valued at below cost. 
C)  In certain circumstances some inventory items will be valued at above cost. 
D)  Net realisable value is related to estimated market value.

Question 10

Which statement relating to the determination of the cost of inventory in a computerised system is not true?

Accepted Answer

A)  Determining the cost of inventory is greatly simplified compared to a manual system. 
B)  Computerised systems generally use the periodic inventory system. 
C)  Computerised inventory systems are now used by most firms. 
D)  The system can automatically produce reorder information. 
A)  Determining the cost of inventory is greatly simplified compared to a manual system. 
B)  Computerised systems generally use the periodic inventory system. 
C)  Computerised inventory systems are now used by most firms. 
D)  The system can automatically produce reorder information.

Question 11

The essence of the perpetual method of accounting for inventory is:

Accepted Answer

A)  it produces a higher gross profit than the periodic method. 
B)  a stocktake is performed. 
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)  it produces a higher gross profit than the periodic method. 
B)  a stocktake is performed. 
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 12

Accepted Answer

A)  $39 600 
B)  $22 600 
C)  $20 400 
D)  $60 000 
A)  $39 600 
B)  $22 600 
C)  $20 400 
D)  $60 000

Question 13

Which of these is not a step in a properly conducted stocktake?

Accepted Answer

A)  Attach an inventory ticket to stock items that have been counted. 
B)  Account for all prenumbered inventory tickets. 
C)  Recount some items by a supervisor or auditor. 
D)  Sell off of damaged goods. 
A)  Attach an inventory ticket to stock items that have been counted. 
B)  Account for all prenumbered inventory tickets. 
C)  Recount some items by a supervisor or auditor. 
D)  Sell off of damaged goods.

Question 14

Indigo Ltd uses the FIFO assumption with the periodic inventory method.
Units Unit Total
Cost cost
Beginning inventory 12 $10 $120
Purchase 10 $12 $120
Purchase 6 $11 $66
Sales during year were 16 units. What was the value assigned to the closing stock of this item at the end of the period?

Accepted Answer

A)  $66 
B)  $120 
C)  $138 
D)  $144 
A)  $66 
B)  $120 
C)  $138 
D)  $144

Question 15

Which statement relating to the moving average method of costing inventories, used with the perpetual inventory system, is true?

Accepted Answer

A)  A new average cost is calculated after each sale and each purchase. 
B)  A new average cost is calculated after each sale. 
C)  A new average cost is calculated after each purchase. 
D)  A new average cost is calculated at the end of each month. 
A)  A new average cost is calculated after each sale and each purchase. 
B)  A new average cost is calculated after each sale. 
C)  A new average cost is calculated after each purchase. 
D)  A new average cost is calculated at the end of each month.

Question 16

Which statement concerning the perpetual inventory method is incorrect?

Accepted Answer

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

Question 17

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

Accepted Answer

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

Question 18

If inventory costs are rising which method gives the highest profit?

Accepted Answer

A)  Weighted average. 
B)  FIFO. 
C)  LIFO. 
D)  It is not possible to calculate which method gives the highest profit. 
A)  Weighted average. 
B)  FIFO. 
C)  LIFO. 
D)  It is not possible to calculate which method gives the highest profit.

Question 19

A physical count of inventory on hand is known as:

Accepted Answer

A)  perpetual inventory method. 
B)  stocktake. 
C)  realisable value. 
D)  average cost. 
A)  perpetual inventory method. 
B)  stocktake. 
C)  realisable value. 
D)  average cost.

Question 20

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.

Exam 19: Inventories

A physical stocktake is carried out:

Which of these is not a possible source of error in calculating closing inventory?

Nugyen Co purchased goods for $3500. While on display, the goods were damaged and it is estimated that they can now only be sold for $2000. Additional marketing and distribution costs are $100. The net realisable value of the goods is:

The accounting standards governing determination of the cost of inventories are:

Montreal Furniture uses a periodic inventory system. During an accounting year many purchases and sales of goods occur. For Montreal, the balance in the general ledger inventory account:

Mikey uses a periodic inventory system and committed an error that understated inventory at the end of Year One. If no further errors occur, at the end of Year Two:

Which statement is untrue?

Which statement relating to the determination of the cost of inventory in a computerised system is not true?

The essence of the perpetual method of accounting for inventory is:

Which of these is not a step in a properly conducted stocktake?

Indigo Ltd uses the FIFO assumption with the periodic inventory method. Units Unit Total Cost cost Beginning inventory 12 $10 $120 Purchase 10 $12 $120 Purchase 6 $11 $66 Sales during year were 16 units. What was the value assigned to the closing stock of this item at the end of the period?

Which statement relating to the moving average method of costing inventories, used with the perpetual inventory system, is true?

Which statement concerning the perpetual inventory method is incorrect?

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

If inventory costs are rising which method gives the highest profit?

A physical count of inventory on hand is known as:

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

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

Accounting for Manufacturing

Cost Accounting Systems

Cash Management and Control

Cost-Volume-Profit Analysis for Decision Making

Budgeting for Planning and Control

Performance Evaluation for Managers

Differential Analysis, Profitability Analysis and Capital Budgeting

Partnerships: Formation, Operation and Reporting

Companies: Formation and Operations

Regulation and the Conceptual Framework

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

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