Question 1

'Net realisable value' of inventories is defined as the net amount that an enterprise expects to realise from the sale of the inventories:

Accepted Answer

A)  in the ordinary course of operations less estimated costs of completion and costs necessary to make the sale. 
B)  plus the estimated costs of completion plus the estimated costs necessary to make the sale. 
C)  in a forced sale. 
D)  plus the estimated costs of completion. 
A)  in the ordinary course of operations less estimated costs of completion and costs necessary to make the sale. 
B)  plus the estimated costs of completion plus the estimated costs necessary to make the sale. 
C)  in a forced sale. 
D)  plus the estimated costs of completion. A

Question 2

Under the periodic inventories approach, which of the following is an appropriate journal entry to measure closing inventories:

Accepted Answer

A)  I. 
B)  II. 
C)  III. 
D)  IV. 
A)  I. 
B)  II. 
C)  III. 
D)  IV. C

Question 3

Which of the following statements is correct:

Accepted Answer

A)  The periodic method of accounting for inventories will always result in a higher closing inventories balance than the perpetual method. 
B)  The periodic method of accounting for inventories will always result in a lower closing inventories balance than the perpetual method. 
C)  Closing inventories will always be the same under the periodic and perpetual methods. 
D)  The relationship between the closing inventories balance under the periodic and perpetual methods will depend on whether the FIFO or weighted average method is used to value inventories. 
A)  The periodic method of accounting for inventories will always result in a higher closing inventories balance than the perpetual method. 
B)  The periodic method of accounting for inventories will always result in a lower closing inventories balance than the perpetual method. 
C)  Closing inventories will always be the same under the periodic and perpetual methods. 
D)  The relationship between the closing inventories balance under the periodic and perpetual methods will depend on whether the FIFO or weighted average method is used to value inventories. C

Question 4

Which of the following are common classifications for the disclosure of inventories in a set of financial statements:

Accepted Answer

A)  I. 
B)  II. 
C)  III. 
D)  IV. 
A)  I. 
B)  II. 
C)  III. 
D)  IV.

Question 5

Where the net realisable value of inventories falls below cost, AASB 102 Inventories requires that:

Accepted Answer

A)  inventories continue to be carried in the statement of financial position at cost. 
B)  inventories be written down to net realisable value. 
C)  no adjustment be made, but the difference between net realisable value and cost be disclosed in the notes to the financial statements. 
D)  the difference be added to the carrying amount of the inventories. 
A)  inventories continue to be carried in the statement of financial position at cost. 
B)  inventories be written down to net realisable value. 
C)  no adjustment be made, but the difference between net realisable value and cost be disclosed in the notes to the financial statements. 
D)  the difference be added to the carrying amount of the inventories.

Question 6

Which of the following is not recognised as an expense in accordance with AASB 102:

Accepted Answer

A)  Cost of goods sold 
B)  Write-downs of inventories to net realisable value 
C)  Reversal of write downs to net realisable value 
D)  Inventories items used by an entity as components in self-constructed property, plant or equipment 
A)  Cost of goods sold 
B)  Write-downs of inventories to net realisable value 
C)  Reversal of write downs to net realisable value 
D)  Inventories items used by an entity as components in self-constructed property, plant or equipment

Question 7

AASB 102 prohibits which of the following from being included in the cost of inventories:

Accepted Answer

A)  Trade discounts received 
B)  Freight (where the terms of sale are FOB destination) 
C)  Production overheads 
D)  Import duties 
A)  Trade discounts received 
B)  Freight (where the terms of sale are FOB destination) 
C)  Production overheads 
D)  Import duties

Question 8

AASB 102 Inventories applies to the accounting for:

Accepted Answer

A)  work in progress under construction contracts. 
B)  financial instruments. 
C)  biological assets. 
D)  materials consumed in the manufacture of knitting machines for sale. 
A)  work in progress under construction contracts. 
B)  financial instruments. 
C)  biological assets. 
D)  materials consumed in the manufacture of knitting machines for sale.

Question 9

The terms '2/7' appearing on an invoice for the sale/purchase of inventories means that the buyer:

Accepted Answer

A)  will receive a 2% discount if paid within 7 days of the invoice date. 
B)  will receive a 7% discount if paid within 2 days of the invoice date. 
C)  has 7 days from the invoice date to pay or will be charged a 2% surcharge. 
D)  has 2 days from the invoice date to pay or will be charged a 7% surcharge. 
A)  will receive a 2% discount if paid within 7 days of the invoice date. 
B)  will receive a 7% discount if paid within 2 days of the invoice date. 
C)  has 7 days from the invoice date to pay or will be charged a 2% surcharge. 
D)  has 2 days from the invoice date to pay or will be charged a 7% surcharge.

Question 10

Ming Limited had the following items of inventories at reporting date.
 
What is the adjustment necessary at reporting date?

Accepted Answer

A)  DR Inventories $50 
B)  DR Inventories $100 
C)  CR Inventories $50 
D)  CR Inventories $0 
A)  DR Inventories $50 
B)  DR Inventories $100 
C)  CR Inventories $50 
D)  CR Inventories $0

Question 11

When determining the net realisable value of inventories, estimates must be made of which of the following:

Accepted Answer

A)  I, II, III and IV 
B)  I, II and III only 
C)  II and IV only 
D)  I, III and IV only 
A)  I, II, III and IV 
B)  I, II and III only 
C)  II and IV only 
D)  I, III and IV only

Question 12

Stock take discrepancies between a count sheet and recorded quantities in the ledger may arise due to which of the following:

Accepted Answer

A)  I, II and III 
B)  II, III and IV 
C)  I, III and IV 
D)  I, II and IV 
A)  I, II and III 
B)  II, III and IV 
C)  I, III and IV 
D)  I, II and IV

Question 13

Duo Ltd uses a periodic inventories system and rounds the average unit cost to the nearest dollar. The following data relates to Duo Ltd for the year ended 30 June 2013.
 
The cost of ending inventories using the weighted average cost method (rounded to the nearest dollar) is:

Accepted Answer

A)  $459. 
B)  $465. 
C)  $499. 
D)  $483. 
A)  $459. 
B)  $465. 
C)  $499. 
D)  $483.

Question 14

Uno Ltd uses a periodic inventories system and rounds the average unit cost to the nearest dollar. The following data relates to Uno Ltd for the year ended 30 June 2014.
 
The cost of goods sold for the year using the weighted average method is:

Accepted Answer

A)  $1528. 
B)  $1734. 
C)  $1425. 
D)  $1984. 
A)  $1528. 
B)  $1734. 
C)  $1425. 
D)  $1984.

Question 15

Under AASB 102 Inventories, items of inventories that are used by business enterprise as components in a self-constructed property asset are required to be:

Accepted Answer

A)  aggregated into the 'cost of goods sold' expense in the period in which the items are used. 
B)  expensed directly into equity in the period in which the items are used. 
C)  capitalised and depreciated. 
D)  added to a 'property construction' provision account. 
A)  aggregated into the 'cost of goods sold' expense in the period in which the items are used. 
B)  expensed directly into equity in the period in which the items are used. 
C)  capitalised and depreciated. 
D)  added to a 'property construction' provision account.

Question 16

When an inventories costing formula is changed, the change is required to be applied:

Accepted Answer

A)  prospectively and the adjustment taken through the current profit or loss. 
B)  retrospectively and the adjustment taken through the opening balance of retained earnings. 
C)  prospectively and the current period adjustment recognised directly in equity. 
D)  retrospectively and the adjustment recognised as an extraordinary gain or loss. 
A)  prospectively and the adjustment taken through the current profit or loss. 
B)  retrospectively and the adjustment taken through the opening balance of retained earnings. 
C)  prospectively and the current period adjustment recognised directly in equity. 
D)  retrospectively and the adjustment recognised as an extraordinary gain or loss.

Question 17

Taxes may be included in the cost of inventories unless they are:

Accepted Answer

A)  levied on the entity by a foreign government. 
B)  in respect to the raw materials component of manufactured inventories. 
C)  recoverable by the entity from the taxing authority. 
D)  in the nature of import duties. 
A)  levied on the entity by a foreign government. 
B)  in respect to the raw materials component of manufactured inventories. 
C)  recoverable by the entity from the taxing authority. 
D)  in the nature of import duties.

Question 18

AASB 102 allows which of the following to be capitalised into the cost of inventories:

Accepted Answer

A)  Storage costs for finished goods 
B)  Selling costs 
C)  Normal wastage costs 
D)  Administrative overheads 
A)  Storage costs for finished goods 
B)  Selling costs 
C)  Normal wastage costs 
D)  Administrative overheads

Question 19

Where inventories in an industry are measured by reference to historical cost, which of the following measurement rules applies subsequent to initial measurement:

Accepted Answer

A)  Historical cost 
B)  Discounted cash flow 
C)  Lower of cost and net realisable value 
D)  Replacement cost 
A)  Historical cost 
B)  Discounted cash flow 
C)  Lower of cost and net realisable value 
D)  Replacement cost

Question 20

AASB 102 requires separate disclosure of:

Accepted Answer

A)  where there has been abnormal wastage which has been expensed. 
B)  details of inventories pledged as security for loans. 
C)  interest costs which have been capitalised into the cost of inventories. 
D)  details of key terms of purchase. 
A)  where there has been abnormal wastage which has been expensed. 
B)  details of inventories pledged as security for loans. 
C)  interest costs which have been capitalised into the cost of inventories. 
D)  details of key terms of purchase.

Exam 4: Inventories

'Net realisable value' of inventories is defined as the net amount that an enterprise expects to realise from the sale of the inventories:

Under the periodic inventories approach, which of the following is an appropriate journal entry to measure closing inventories:

Which of the following statements is correct:

Which of the following are common classifications for the disclosure of inventories in a set of financial statements:

Where the net realisable value of inventories falls below cost, AASB 102 Inventories requires that:

Which of the following is not recognised as an expense in accordance with AASB 102:

AASB 102 prohibits which of the following from being included in the cost of inventories:

AASB 102 Inventories applies to the accounting for:

The terms '2/7' appearing on an invoice for the sale/purchase of inventories means that the buyer:

Ming Limited had the following items of inventories at reporting date. What is the adjustment necessary at reporting date?

When determining the net realisable value of inventories, estimates must be made of which of the following:

Stock take discrepancies between a count sheet and recorded quantities in the ledger may arise due to which of the following:

Duo Ltd uses a periodic inventories system and rounds the average unit cost to the nearest dollar. The following data relates to Duo Ltd for the year ended 30 June 2013. The cost of ending inventories using the weighted average cost method (rounded to the nearest dollar) is:

Uno Ltd uses a periodic inventories system and rounds the average unit cost to the nearest dollar. The following data relates to Uno Ltd for the year ended 30 June 2014. The cost of goods sold for the year using the weighted average method is:

Under AASB 102 Inventories, items of inventories that are used by business enterprise as components in a self-constructed property asset are required to be:

When an inventories costing formula is changed, the change is required to be applied:

Taxes may be included in the cost of inventories unless they are:

AASB 102 allows which of the following to be capitalised into the cost of inventories:

Where inventories in an industry are measured by reference to historical cost, which of the following measurement rules applies subsequent to initial measurement:

AASB 102 requires separate disclosure of:

Accounting Regulation and the Conceptual Framework

Application of Accounting Theory

Fair Value Measurement

Property, Plant and Equipment

Intangible Assets

Impairment of Assets

Provisions, Contingent Liabilities and Contingent Assets

Employee Benefits

Leases

Financial Instruments

Income Taxes

Share Capital and Reserves

Share-Based Payment

Revenue

Presentation of Financial Statements

Statement of Cash Flows

Accounting Policies and Other Disclosures

Earnings Per Share

Operating Segments

Related Party Disclosures

Sustainability and Corporate Social Responsibility Reporting

Foreign Currency Transactions and Forward Exchange Contracts

Translation of Foreign Currency Financial Statements

Business Combinations

Consolidation: Controlled Entities

Consolidation: Wholly Owned Entities

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Consolidation: Other Issues

Associates and Joint Ventures

Joint Arrangements

Insolvency and Liquidation

Accounting for Mineral Resources

Agriculture

Filters