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.

Question 2

Hall & Co sells calculators.At the beginning of June 100 Z800 scientific calculators were on hand for which the firm had paid $20 each.Purchases and sales for the month were as follows.
Date Purchases Unit Cost Sales
Units units
June 3 120 $21
10 150 $22
29 180
If Hall & Co uses a periodic system with a LIFO cost flow assumption June's cost of sales for the Z800 scientific calculators is:

Accepted Answer

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

Question 3

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.

Question 4

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.

Question 5

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.

Question 6

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.

Question 7

The accounting standard that deals with inventories is:

Accepted Answer

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

Question 8

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.

Question 9

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 D

Question 10

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.

Question 11

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.

Question 12

Liquidator Lounges' showroom was flooded and its inventory was totally destroyed.Its accounting records were damaged but the following information was salvaged.
Sales revenue (to date this period) $380 000
Beginning inventory (at retail)  $90 000
Purchases (to date this period at retail) $400 000
Historical gross profit percentage 60%
Assuming the historical gross profit ratio is maintained the estimated cost of inventory lost in the flood is:

Accepted Answer

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

Question 13

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.

Question 14

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. B

Question 15

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.

Question 16

Torago Sales uses a periodic inventory system with the weighted average method of cost assignment.The following data are available.
Date Units Unit Cost
$
Jan) 6 Beginning inventory 600 10
15 Purchase 1500 11
26 Purchase 1000 12
3100
31 Sale 1000 20
Closing inventory 2100
To the nearest whole dollar what is the value of cost of sales for January?

Accepted Answer

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

Question 17

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.

Question 18

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

Question 19

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.

Question 20

A physical count of inventory on hand is known as:

Accepted Answer

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

Exam 13: Inventories

A physical stocktake is carried out:

Correct Answer
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Correct Answer
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Inventory is normally classified in the balance sheet as a:

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

Correct Answer
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Which statement concerning inventory is not true?

Correct Answer
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A major theoretical problem in accounting for inventory is:

Correct Answer
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The accounting standard that deals with inventories is:

Correct Answer
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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:

Correct Answer
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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

Correct Answer
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D

Net realisable value in relation to inventory is:

Correct Answer
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Assuming rising prices,which statement is correct?

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

Correct Answer
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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:

Correct Answer
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B

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:

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

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

Correct Answer
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A

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

Correct Answer
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A physical count of inventory on hand is known as:

Correct Answer
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Exam 13: Inventories

A physical stocktake is carried out:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Inventory is normally classified in the balance sheet as a:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which statement concerning inventory is not true?

Correct AnswerverifiedShow Answer

A major theoretical problem in accounting for inventory is:

Correct AnswerverifiedShow Answer

The accounting standard that deals with inventories is:

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedD

Net realisable value in relation to inventory is:

Correct AnswerverifiedShow Answer

Assuming rising prices,which statement is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedB

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:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedA

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

Correct AnswerverifiedShow Answer

A physical count of inventory on hand is known as:

Correct AnswerverifiedShow Answer

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D

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B

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A

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