Question 1

Taxes may be included in the costs of inventory unless they are:

Accepted Answer

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

Question 2

Uno Ltd uses a periodic inventory 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:

Accepted Answer

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

Question 3

When determining the net realisable value of inventory, estimates must be made of the following:
I Estimated costs of completion (if any).
II Expected replacement cost.
III Expected selling price.
IV Estimated selling costs.

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.

Question 4

IAS 2 prohibits which of the following from being included in the cost of inventory?

Accepted Answer

A)  trade discounts received 
B)  freight (where the terms of sale are FOB destination) 
C)  production overheads 
D)  import duties

Question 5

All 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.

Question 6

IAS 2 Inventories requires that when inventories are written down to net realisable value, they are written-down:

Accepted Answer

A)  on a class-by-class basis; 
B)  on the basis of industry segment; 
C)  on an item-by-item basis; 
D)  according to geographical segment within the entity.

Question 7

IAS 2 requires separate disclosure of:

Accepted Answer

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

Question 8

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.

Question 9

Stock take discrepancies between a count sheet and recorded quantities in the ledger may arise due to:
I Theft of stock during the year
II Stock purchased under FOB destination terms being in transit at period end
III A consignee including consignment stock in their physical count.
IV Sales returns not being processed into the ledger

Accepted Answer

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

Exam 9: Inventories