Question 1

Which of the following information concerning inventory is not required to be disclosed in the external financial reports?

Accepted Answer

A)  Finished goods 
B)  Work in process 
C)  Inventory turnover ratio 
D)  Method of valuation,e.g. FIFO, weighted average 
A)  Finished goods 
B)  Work in process 
C)  Inventory turnover ratio 
D)  Method of valuation,e.g. FIFO, weighted average

Question 2

Accepted Answer

A)  $690 000 
B)  $410 000 
C)  $280 000 
D)  $270 000 
A)  $690 000 
B)  $410 000 
C)  $280 000 
D)  $270 000

Question 3

In performing a stocktake care must be taken with goods in transit. Which of these statements is true?

Accepted Answer

A)  Stock on consignment is regarded as sold by the consignor. 
B)  Stock on consignment is included in the stock of the consignor. 
C)  Goods in transit should be included in both the purchasers and the seller's inventory. 
D)  Stock on consignment is included in the stock of the consignee. 
A)  Stock on consignment is regarded as sold by the consignor. 
B)  Stock on consignment is included in the stock of the consignor. 
C)  Goods in transit should be included in both the purchasers and the seller's inventory. 
D)  Stock on consignment is included in the stock of the consignee.

Question 4

Accepted Answer

A)  $10 000 
B)  $10 400 
C)  $11 129 
D)  $20 000 
A)  $10 000 
B)  $10 400 
C)  $11 129 
D)  $20 000

Question 5

Millibrand Co uses a periodic inventory system with the specific identification method of cost assignment.
Date Units Unit cost
$
Beginning inventory July 1 1000 9
Purchase 12 2000 11
Purchase 26 1000 12
On 27 July 500 units from beginning inventory and 1000 units from the 12 July purchase were sold. What was the value of ending inventory at 31 July?

Accepted Answer

A)  $20 500 
B)  $23 000 
C)  $27 500 
D)  $28 500 
A)  $20 500 
B)  $23 000 
C)  $27 500 
D)  $28 500

Question 6

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

Accepted Answer

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

Question 7

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

Accepted Answer

A)  The formula for average cost is cost of goods available for sale divided by units for sale. 
B)  A new average cost is calculated after each sale. 
C)  A new average cost is calculated after each purchase return. 
D)  In periods of rising prices the profit result is between that of the FIFO and LIFO methods. 
A)  The formula for average cost is cost of goods available for sale divided by units for sale. 
B)  A new average cost is calculated after each sale. 
C)  A new average cost is calculated after each purchase return. 
D)  In periods of rising prices the profit result is between that of the FIFO and LIFO methods.

Question 8

If inventory prices are rising the method of inventory valuation that gives the highest profit and the highest ending inventory is:

Accepted Answer

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

Question 9

The ratio that indicates an entity's overall mark-up on goods sold is the:

Accepted Answer

A)  return on inventory ratio. 
B)  gross profit ratio. 
C)  inventory turnover ratio. 
D)  profit margin ratio. 
A)  return on inventory ratio. 
B)  gross profit ratio. 
C)  inventory turnover ratio. 
D)  profit margin ratio.

Question 10

Won Inc has an historical gross profit percentage of 35%. Net purchases for six months were $1400 and sales were $2000. Inventory at the end of the previous period was $200. If Won Inc prepares an interim balance sheet the amount that can be estimated for closing inventory is:

Accepted Answer

A)  $100. 
B)  $300. 
C)  $1000. 
D)  $400. 
A)  $100. 
B)  $300. 
C)  $1000. 
D)  $400.

Question 11

How many of these are advantages of the weighted average method of applying costs to inventory?
F1F1F1S1F1F1F10F1F1F1S1F1F1F10It is not subject to profit manipulation.
F1F1F1S1F1F1F10F1F1F1S1F1F1F10The profit and closing inventory values tend to be 'smoothed' compared to other methods.
F1F1F1S1F1F1F10F1F1F1S1F1F1F10It is simple to understand.

Accepted Answer

A)  0 
B)  1 
C)  2 
D)  3 
A)  0 
B)  1 
C)  2 
D)  3

Question 12

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

Accepted Answer

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

Question 13

Inventory is normally classified in the balance sheet as a:

Accepted Answer

A)  non-current asset. 
B)  current asset. 
C)  negative asset. 
D)  current liability. 
A)  non-current asset. 
B)  current asset. 
C)  negative asset. 
D)  current liability.

Question 14

At 31 December 2014, the end of their accounting year, the Zanzibar trading company understated ending inventory by $4,250. The profit for 2014 will be:

Accepted Answer

A)  understated. 
B)  correctly stated. 
C)  overstated. 
D)  dependant on whether or not the inventory increased during 2014. 
A)  understated. 
B)  correctly stated. 
C)  overstated. 
D)  dependant on whether or not the inventory increased during 2014.

Question 15

Net realisable value in relation to inventory is:

Accepted Answer

A)  estimated selling price less stock loss. 
B)  estimated discounted value. 
C)  estimated replacement value. 
D)  estimated selling price less anticipated further costs to complete the sale. 
A)  estimated selling price less stock loss. 
B)  estimated discounted value. 
C)  estimated replacement value. 
D)  estimated selling price less anticipated further costs to complete the sale.

Question 16

The lower of cost or net realisable value procedure is used with which of the following?
i. FIFO
ii. Weighted average
iii. The perpetual method

Accepted Answer

A)  i. 
B)  ii 
C)  i, ii 
D)  i, ii, iii 
A)  i. 
B)  ii 
C)  i, ii 
D)  i, ii, iii

Question 17

A major theoretical problem in accounting for inventory is:

Accepted Answer

A)  calculating the cost of purchases. 
B)  allocating costs between cost of sales and stock on hand. 
C)  counting the stock. 
D)  deciding which goods are obsolete. 
A)  calculating the cost of purchases. 
B)  allocating costs between cost of sales and stock on hand. 
C)  counting the stock. 
D)  deciding which goods are obsolete.

Question 18

For which of these would the specific identification method of costing inventory be unsuitable?

Accepted Answer

A)  Gold jewellery 
B)  Motor vehicles 
C)  Works of art 
D)  Petrol at a service station 
A)  Gold jewellery 
B)  Motor vehicles 
C)  Works of art 
D)  Petrol at a service station

Question 19

Which statement concerning inventory is not true?

Accepted Answer

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

Question 20

Which item should not be included in the income statement's cost of inventory?

Accepted Answer

A)  The invoice price of the goods 
B)  Costs associated with receiving and inspecting the goods 
C)  Costs incurred in preparing the goods for sale 
D)  GST 
A)  The invoice price of the goods 
B)  Costs associated with receiving and inspecting the goods 
C)  Costs incurred in preparing the goods for sale 
D)  GST

Exam 19: Inventories

Which of the following information concerning inventory is not required to be disclosed in the external financial reports?

In performing a stocktake care must be taken with goods in transit. Which of these statements is true?

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

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

If inventory prices are rising the method of inventory valuation that gives the highest profit and the highest ending inventory is:

The ratio that indicates an entity's overall mark-up on goods sold is the:

Won Inc has an historical gross profit percentage of 35%. Net purchases for six months were $1400 and sales were $2000. Inventory at the end of the previous period was $200. If Won Inc prepares an interim balance sheet the amount that can be estimated for closing inventory is:

How many of these are advantages of the weighted average method of applying costs to inventory? It is not subject to profit manipulation. The profit and closing inventory values tend to be 'smoothed' compared to other methods. It is simple to understand.

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

Inventory is normally classified in the balance sheet as a:

At 31 December 2014, the end of their accounting year, the Zanzibar trading company understated ending inventory by $4,250. The profit for 2014 will be:

Net realisable value in relation to inventory is:

The lower of cost or net realisable value procedure is used with which of the following? i. FIFO ii. Weighted average iii. The perpetual method

A major theoretical problem in accounting for inventory is:

For which of these would the specific identification method of costing inventory be unsuitable?

Which statement concerning inventory is not true?

Which item should not be included in the income statement's cost of 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

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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