Book Title; Author

Chapter 13 - Multiple choice quiz


1.
Inventory is defined as goods held for resale in the ordinary course of business. Which of the following would not be included in inventory for any type of business.
A.
Land held for resale
B.
Cash at bank
C.
Work in process
D.
Computers


2.
In performing a stocktake care must be taken with goods in transit. Which of these statements is true?
A.
Stock on consignment is regarded as sold by the consignor
B.
Stock on consignment is not included in the stock of the consignor
C.
Goods in transit should be included in both the purchasers and the seller's inventory
D.
Sales invoices for two weeks after the end of the accounting period should be reviewed to identify goods in transit


3.
The accounting standard that deals with inventories is:
A.
IAS 10/AASB 1010
B.
IAS 21/AASB 1021
C.
IAS 2/ AASB 102
D.
IAS 103/AASB 1030


4.
Moon uses a periodic inventory system with the specific identification method of cost assignment. The following data are available:
Date     Units Unit Cost
Jan 6 Beginning inventory
$
  15 Purchase
1 000
10
  26 Purchase
2 000
11
     
1 000
12
  31 Sale from the 15 January purchase
4 000
    Closing inventory
1 000
20
     
3 000

 The value of closing inventory at 31 January is:
A.
$33 000
B.
$30 000
C.
$34 000
D.
$60 000


5.
The statement that is correct is:
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


6.
Moon 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
$
  15 Purchase
1 000
10
  26 Purchase
2 000
11
     
1 000
12
  31 Sale from the 15 January purchase
4 000
    Closing inventory
1 000
20
     
3 000


What is the value of cost of sales for January?
A.
$10 000
B.
$11 000
C.
$12 000
D.
$20 000


7.
For which of these would the specific identification method of costing inventory be unsuitable?
A.
Gold jewellery
B.
Motor vehicles
C.
Works of art
D.
Petrol at a service station


8.
Moon uses a periodic inventory system with the specific identification method of cost assignment. The following data are available:

Date     Units Unit Cost
Jan 6 Beginning inventory
$
  15 Purchase
1 000
10
  26 Purchase
2 000
11
     
1 000
12
  31 Sale from the 15 January purchase
4 000
    Closing inventory
1 000
20
     
3 000

What is the value of cost of sales for January?
 
A.
$10 000
B.
$11 000
C.
$12 000
D.
$20 000


9.
Moon uses a periodic inventory system with the last-in first-out method of cost assignment. The following data are available:
 

Date     Units Unit Cost
Jan 6 Beginning inventory
$
  15 Purchase
1 000
10
  26 Purchase
2 000
11
     
1 000
12
  31 Sale from the 15 January purchase
4 000
    Closing inventory
1 000
20
     
3 000
What is the value of closing inventory at 31 January?
 
A.
$33 000
B.
$30 000
C.
$32 000
D.
$60 000


10.
If inventory costs are rising which method gives the highest profit?
A.
Weighted average
B.
FIFO
C.
LIFO
D.
None of the above


11.
Which of these is an advantage of the weighted average method of applying costs to inventory?
A.
It is not subject to profit manipulation
B.
The profit and closing inventory values tend to be 'smoothed' compared to other methods
C.
It is simple to understand
D.
All are advantages


12.
The statement concerning the perpetual inventory method that is incorrect is:
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


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?
A.
$4 000
B.
$4 800
C.
$4 212
D.
$3 800


14.
The essence of the perpetual method of accounting for inventory is:
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


15.
The stock of AD computer modems at 20 March, as per the stock card, is 1 010 units which cost, in total, $20 800. If a purchase of 500 modems is made for $11 000, what is the average cost of the modems after the purchase?
A.
$20.60
B.
$21.06
C.
$22.00
D.
$22.50


16.
Assuming rising prices, which of the following statements is correct?
A.
FIFO reports a lower value for COGS than other methods
B.
FIFO reports a higher value for COGS than other methods
C.
FIFO reports a lower value for closing inventory than other methods
D.
None of the above


17.
Net realisable value in relation to inventory is:
A.
Estimate 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


18.
The statement that is untrue is:
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


19.
Which 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
 
A.
1
B.
2
C.
3
D.
4


20.
Which of these is not a possible source of error in calculating closing inventory?
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.
None of the above, i.e. all are possible sources of errors


21.
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:
A.
$16 000
B.
$10 400
C.
$26 400
D.
$19 000


22.
Won Ltd has a historical gross profit percentage of 35%. Net purchases for six months were $1 400 and sales $2 000. Inventory at the end of the previous period was $200. If Won Ltd prepares an interim balance sheet the amount that can be estimated for closing inventory is:
A.
$100
B.
$300
C.
$1 000
D.
$400


23.
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:
A.
$110 000
B.
$66 000
C.
$490 000
D.
$90 000


24.
Which of the following information concerning inventory is not required to be disclosed in external financial reports?
A.
Inventory turnover ratio
B.
Finished goods
C.
Work in process
D.
Method of valuation, eg. FIFO, weighted average


25.
The formula, cost of sales/average inventory, measures:
A.
The gross profit ratio
B.
The number of times, on average, that inventory is turned over per year
C.
The mark-up on inventory expressed as a percentage of the cost price
D.
None of the above


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