Question 1

Which of these is not a possible source of error in calculating closing inventory?

Accepted Answer

A)   An incorrect cut-off between accounting periods.
B)   Mistakes in counting during the stocktake.
C)   Mistakes in the price at which the goods are sold to customers.
D)   Mistakes in dealing with goods on consignment. C

Question 2

The accounting standards governing determination of the cost of inventories are:

Accepted Answer

A)   IAS 2/AASB 102.
B)   IAS 8/AASB 108.
C)   IAS 13/AASB 108.
D)   IAS 34/AASB 134.

Question 3

A physical count of inventory on hand is known as:

Accepted Answer

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

Question 4

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. C

Question 5

The formula, cost of sales/average inventory, measures the:

Accepted Answer

A)   gross profit ratio.
B)   number of times, on average, that inventory is turned over per year.
C)   mark-up on inventory expressed as a percentage of the cost price.
D)   mark-up on inventory expressed as a percentage of the selling price.

Question 6

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

Accepted Answer

A)   it produces a higher gross profit than the periodic method.
B)   a stocktake is performed.
C)   cost of sales is calculated at the end of the accounting period.
D)   all movements in each item of stock are tracked via detailed inventory records.

Question 7

Which statement is untrue?

Accepted Answer

A)   Inventory is normally valued at cost.
B)   In certain circumstances some inventory items will be valued at below cost.
C)   In certain circumstances some inventory items will be valued at above cost.
D)   Net realisable value is related to estimated market value.

Question 8

Under IAS 2/AASB 102 the costing method that is not permitted is:

Accepted Answer

A)   LIFO.
B)   weighted/moving average.
C)   FIFO.
D)   specific identification.

Question 9

Accepted Answer

A)   $39 600
B)   $22 600
C)   $20 400
D)   $60 000

Question 10

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.

Question 11

Accepted Answer

A)   $16 900.
B)   $17 500.
C)   $19 500.
D)   $21 000.

Question 12

Which statement relating to the determination of the cost of inventory in a computerised system is not true?

Accepted Answer

A)   Determining the cost of inventory is greatly simplified compared to a manual system.
B)   Computerised systems generally use the periodic inventory system.
C)   Computerised inventory systems are now used by most firms.
D)   The system can automatically produce reorder information.

Question 13

Indigo Ltd uses the FIFO assumption with the periodic inventory method.
Units Unit Total
Cost cost
Beginning inventory 12 $10 $120
Purchase 10 $12 $120
Purchase 6 $11 $66
Sales during year were 16 units. What was the value assigned to the closing stock of this item at the end of the period?

Accepted Answer

A)   $66
B)   $120
C)   $138
D)   $144

Question 14

Which of these is not a step in a properly conducted stocktake?

Accepted Answer

A)   Attach an inventory ticket to stock items that have been counted.
B)   Account for all prenumbered inventory tickets.
C)   Recount some items by a supervisor or auditor.
D)   Sell off of damaged goods.

Question 15

If inventory costs are rising which method gives the highest profit?

Accepted Answer

A)   Weighted average.
B)   FIFO.
C)   LIFO.
D)   It is not possible to calculate which method gives the highest profit.

Question 16

Accepted Answer

A)   Land held for resale
B)   Cash at bank
C)   Work in process
D)   Computers

Question 17

Nugyen Co purchased goods for $3500. While on display, the goods were damaged and it is estimated that they can now only be sold for $2000. Additional marketing and distribution costs are $100. The net realisable value of the goods is:

Accepted Answer

A)   $1900.
B)   $2000.
C)   $3500.
D)   $3400. A

Question 18

Which statement concerning the perpetual inventory method is incorrect?

Accepted Answer

A)   A stocktake is required to estimate cost of sales.
B)   A continuous record is kept of all movements in inventory.
C)   With the increased use of computers it has become the most common system.
D)   Cost of sales is calculated for each transaction.

Question 19

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 20

Montreal Furniture uses a periodic inventory system. During an accounting year many purchases and sales of goods occur. For Montreal, the balance in the general ledger inventory account:

Accepted Answer

A)   does not change until a stock-take is carried out.
B)   represents the goods on hand at any given point in time.
C)   reports the goods purchased since the beginning of the accounting period.
D)   will usually be zero except at a balance sheet date.

Exam 19: Inventories

Which of these is not a possible source of error in calculating closing inventory?

Correct Answer
verified
C

The accounting standards governing determination of the cost of inventories are:

Correct Answer
verified

A physical count of inventory on hand is known as:

Correct Answer
verified

A physical stocktake is carried out:

Correct Answer
verified
C

The formula, cost of sales/average inventory, measures the:

Correct Answer
verified

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

Correct Answer
verified

Which statement is untrue?

Correct Answer
verified

Under IAS 2/AASB 102 the costing method that is not permitted is:

Correct Answer
verified

Correct Answer
verified

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
verified

Correct Answer
verified

Which statement relating to the determination of the cost of inventory in a computerised system is not true?

Correct Answer
verified

Indigo Ltd uses the FIFO assumption with the periodic inventory method. Units Unit Total Cost cost Beginning inventory 12 $10 $120 Purchase 10 $12 $120 Purchase 6 $11 $66 Sales during year were 16 units. What was the value assigned to the closing stock of this item at the end of the period?

Correct Answer
verified

Which of these is not a step in a properly conducted stocktake?

Correct Answer
verified

If inventory costs are rising which method gives the highest profit?

Correct Answer
verified

Correct Answer
verified

Nugyen Co purchased goods for $3500. While on display, the goods were damaged and it is estimated that they can now only be sold for $2000. Additional marketing and distribution costs are $100. The net realisable value of the goods is:

Correct Answer
verified
A

Which statement concerning the perpetual inventory method is incorrect?

Correct Answer
verified

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

Correct Answer
verified

Montreal Furniture uses a periodic inventory system. During an accounting year many purchases and sales of goods occur. For Montreal, the balance in the general ledger inventory account:

Correct Answer
verified

Exam 19: Inventories

Which of these is not a possible source of error in calculating closing inventory?

Correct AnswerverifiedC

The accounting standards governing determination of the cost of inventories are:

Correct AnswerverifiedShow Answer

A physical count of inventory on hand is known as:

Correct AnswerverifiedShow Answer

A physical stocktake is carried out:

Correct AnswerverifiedC

The formula, cost of sales/average inventory, measures the:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which statement is untrue?

Correct AnswerverifiedShow Answer

Under IAS 2/AASB 102 the costing method that is not permitted is:

Correct AnswerverifiedShow Answer

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 AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which statement relating to the determination of the cost of inventory in a computerised system is not true?

Correct AnswerverifiedShow Answer

Indigo Ltd uses the FIFO assumption with the periodic inventory method. Units Unit Total Cost cost Beginning inventory 12 $10 $120 Purchase 10 $12 $120 Purchase 6 $11 $66 Sales during year were 16 units. What was the value assigned to the closing stock of this item at the end of the period?

Correct AnswerverifiedShow Answer

Which of these is not a step in a properly conducted stocktake?

Correct AnswerverifiedShow Answer

If inventory costs are rising which method gives the highest profit?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Nugyen Co purchased goods for $3500. While on display, the goods were damaged and it is estimated that they can now only be sold for $2000. Additional marketing and distribution costs are $100. The net realisable value of the goods is:

Correct AnswerverifiedA

Which statement concerning the perpetual inventory method is incorrect?

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

Montreal Furniture uses a periodic inventory system. During an accounting year many purchases and sales of goods occur. For Montreal, the balance in the general ledger inventory account:

Correct AnswerverifiedShow Answer

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified