Question 1

A way that products can be unequivocally identified is by the use of:

Accepted Answer

A)  ledger numbers. 
B)  invoice numbers. 
C)  bar codes. 
D)  photos. 
A)  ledger numbers. 
B)  invoice numbers. 
C)  bar codes. 
D)  photos.

Question 2

If Carmel knows that the ending inventory at retail for her corner store is $16 000 and her cost to retail percentage is 65%, her ending inventory at cost can be estimated as:

Accepted Answer

A)  $16 000. 
B)  $10 400. 
C)  $26 400. 
D)  $19 000. 
A)  $16 000. 
B)  $10 400. 
C)  $26 400. 
D)  $19 000.

Question 3

Accepted Answer

A)  $110 000. 
B)  $66 000. 
C)  $490 000. 
D)  $90 000. 
A)  $110 000. 
B)  $66 000. 
C)  $490 000. 
D)  $90 000.

Question 4

Assuming rising prices, which statement is correct?

Accepted Answer

A)  FIFO reports a lower value for cost of sales than other methods. 
B)  FIFO reports a lower profit than other methods. 
C)  FIFO reports a lower value for closing inventory than other methods. 
D)  With the FIFO assumption, assuming prices are rising, it is not possible to calculate whether cost of sales/inventory is lower or higher than it would be if other assumptions about inventory valuation were made. 
A)  FIFO reports a lower value for cost of sales than other methods. 
B)  FIFO reports a lower profit than other methods. 
C)  FIFO reports a lower value for closing inventory than other methods. 
D)  With the FIFO assumption, assuming prices are rising, it is not possible to calculate whether cost of sales/inventory is lower or higher than it would be if other assumptions about inventory valuation were made.

Question 5

Accepted Answer

A)  $3890. 
B)  $3930. 
C)  $3980. 
D)  $4140. 
A)  $3890. 
B)  $3930. 
C)  $3980. 
D)  $4140.

Question 6

All the statements concerning the retail inventory method of estimating closing stock are correct except which of the following?

Accepted Answer

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

Question 7

How many of these are reasons for the selling value of some inventory items falling below their cost price?
F1F1F1S1F1F1F10F1F1F1S1F1F1F10Obsolescence
F1F1F1S1F1F1F10F1F1F1S1F1F1F10Damage
F1F1F1S1F1F1F10F1F1F1S1F1F1F10Past use-by date
F1F1F1S1F1F1F10F1F1F1S1F1F1F10A rise in the market price

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 8

Which of these is not included in the cost of inventory as defined by IAS 2/AASB 102?

Accepted Answer

A)  Cost of purchase. 
B)  Costs incurred in bringing the inventory to its present location and condition. 
C)  GST. 
D)  Import duties. 
A)  Cost of purchase. 
B)  Costs incurred in bringing the inventory to its present location and condition. 
C)  GST. 
D)  Import duties.

Question 9

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

Accepted Answer

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

Question 10

Accepted Answer

A)  IAS 10/AASB 1010. 
B)  IAS 21/AASB 1021. 
C)  IAS 2/ AASB 102. 
D)  IAS 103/AASB 1030. 
A)  IAS 10/AASB 1010. 
B)  IAS 21/AASB 1021. 
C)  IAS 2/ AASB 102. 
D)  IAS 103/AASB 1030.

Question 11

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

Accepted Answer

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

Question 12

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

Accepted Answer

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

Question 13

The average cost of AD computer modems on 30 March, as per the stock card, is $21.06. If 200 modems are sold at $24.00 each, what is the cost of the modems charged to the income statement, assuming the weighted average method of costing is used?

Accepted Answer

A)  $4000 
B)  $4800 
C)  $4212 
D)  $3800 
A)  $4000 
B)  $4800 
C)  $4212 
D)  $3800

Question 14

All of these statements about the presentation of inventory in financial reports are correct except which of the following?

Accepted Answer

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

Question 15

Which statement is correct?

Accepted Answer

A)  LIFO assumes the last goods purchased are the first goods sold. 
B)  LIFO assumes the first goods purchased are the first goods sold. 
C)  LIFO assumes that cost of sales consists of the oldest purchases. 
D)  LIFO assumes that stock at end consists of the most recent purchases. 
A)  LIFO assumes the last goods purchased are the first goods sold. 
B)  LIFO assumes the first goods purchased are the first goods sold. 
C)  LIFO assumes that cost of sales consists of the oldest purchases. 
D)  LIFO assumes that stock at end consists of the most recent purchases.

Question 16

The statement relating to the lower of cost and net realisable value rule that is untrue is which of the following?

Accepted Answer

A)  It results in probable losses being recorded in the period when they are first noticed rather than when the sale occurs. 
B)  The rule is based on the accounting principle of conservatism (prudence). 
C)  The gross profit reported in the period when the rule is applied is higher than it otherwise would be. 
D)  The rule is applied separately to each item of inventory or to groups of inventory items. 
A)  It results in probable losses being recorded in the period when they are first noticed rather than when the sale occurs. 
B)  The rule is based on the accounting principle of conservatism (prudence). 
C)  The gross profit reported in the period when the rule is applied is higher than it otherwise would be. 
D)  The rule is applied separately to each item of inventory or to groups of inventory items.

Question 17

Identify the statement relating to the lower of cost and net realisable value rule that is untrue.

Accepted Answer

A)  It results in probable losses being recorded in the period when they are first noticed rather than when the sale occurs. 
B)  The rule is based on the accounting principle of prudence (conservatism). 
C)  The gross profit reported in the period when the rule is applied is higher than it otherwise would be. 
D)  The rule is applied separately to each item of inventory or to groups of inventory. 
A)  It results in probable losses being recorded in the period when they are first noticed rather than when the sale occurs. 
B)  The rule is based on the accounting principle of prudence (conservatism). 
C)  The gross profit reported in the period when the rule is applied is higher than it otherwise would be. 
D)  The rule is applied separately to each item of inventory or to groups of inventory.

Question 18

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

Accepted Answer

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

Question 19

Which of these is not one of the methods used to assign costs between cost of sales and closing inventory?

Accepted Answer

A)  Specific identification 
B)  First-in first-out 
C)  Lower of cost and net realisable value 
D)  Weighted average 
A)  Specific identification 
B)  First-in first-out 
C)  Lower of cost and net realisable value 
D)  Weighted average

Question 20

Accepted Answer

A)  $8333. 
B)  $8000. 
C)  $7300. 
D)  $6000. 
A)  $8333. 
B)  $8000. 
C)  $7300. 
D)  $6000.

Exam 19: Inventories

A way that products can be unequivocally identified is by the use of:

If Carmel knows that the ending inventory at retail for her corner store is $16 000 and her cost to retail percentage is 65%, her ending inventory at cost can be estimated as:

Assuming rising prices, which statement is correct?

All the statements concerning the retail inventory method of estimating closing stock are correct except which of the following?

How many of these are reasons for the selling value of some inventory items falling below their cost price? Obsolescence Damage Past use-by date A rise in the market price

Which of these is not included in the cost of inventory as defined by IAS 2/AASB 102?

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

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

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

The average cost of AD computer modems on 30 March, as per the stock card, is $21.06. If 200 modems are sold at $24.00 each, what is the cost of the modems charged to the income statement, assuming the weighted average method of costing is used?

All of these statements about the presentation of inventory in financial reports are correct except which of the following?

Which statement is correct?

The statement relating to the lower of cost and net realisable value rule that is untrue is which of the following?

Identify the statement relating to the lower of cost and net realisable value rule that is untrue.

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

Which of these is not one of the methods used to assign costs between cost of sales and closing 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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