1. Inventory should be stated at(a) Lower of cost and fair value.(b) Lower of cost and net realizable value.(c) Lower of cost and nominal value.(d) Lower of cost and net selling price.2. Which of the following costs of conversion cannot be includedin cost of inventory?(a) Cost of direct labor.(b) Factory rent and utilities.(c) Salaries of sales staff (sales department shares the buildingwith factory supervisor).(d) Factory overheads based on normal capacity.3. Inventories are assets(a) Used in the production or supply of goods and services foradministrative purposes.(b) Held for sale in the ordinary course of business.(c) Held for long-term capital appreciation.(d) In the process of production for such sale.(e) In the form of materials or supplies to be consumed in theproduction process or therendering of services.(f) Choices b and d.(g) Choices b, d, and e.4. The cost of inventory should not include(a) Purchase price.(b) Import duties and other taxes.(c) Abnormal amounts of wasted materials.(d) Administrative overhead.(e) Fixed and variable production overhead.(f) Selling costs.(g) Choices c, d, and f.5. ABC LLC manufactures and sells paper envelopes. The stock ofenvelopes was included in the closing inventory as of December31, 2005, at a cost of GHS50 each per pack. During the final audit,the auditors noted that the subsequent sale price for the inventoryat January 15, 2006, was GHS40 each per pack. Furthermore,inquiry reveals that during the physical stock take, a water leakagehas created damages to the paper and the glue. Accordingly, in thefollowing week, ABC LLC spent a total of GHS15 per pack forrepairing and reapplying glue to the envelopes. The net realizablevalue and inventory write-down (loss)amount to(a) GHS40 and GHS10 respectively.(b) GHS45 and GHS10 respectively.(c) GHS25 and GHS25 respectively.(d) GHS35 and GHS25 respectively.(e) GHS30 and GHS15 respectively. 1. IAS 36 applies to which of the following assets?(a) Inventories.(b) Financial assets.(c) Assets held for sale.(d) Property, plant, and equipment.2. Value-in-use is(a) The market value.(b) The discounted present value of future cash flows arising fromuse of the asset and from its disposal.(c) The higher of an asset's fair value less cost to sell and itsmarket value.(d) The amount at which the asset is recognized in the balancesheet.3. If the fair value less costs to sell cannot be determined(a) The asset is not impaired.(b) The recoverable amount is the value-in-use.(c) The net realizable value is used.(d) The carrying value of the asset remains the same.4. If assets are to be disposed of(a) The recoverable amount is the fair value less costs to sell.(b) The recoverable amount is the value-in-use.(c) The asset is not impaired.(d) The recoverable amount is the carrying value.5. Estimates of future cash flows normally would coverprojections over a maximum of(a) Five years.(b) Ten years.(c) Fifteen years.(d) Twenty years.6. An entity has a database that it purchased five years ago. At thatdate, the database had 15,000 customeraddresses on it. Since the date of purchase, 1,000 addresses havebeen taken from the list and 2,000 addresses have been added tothe list. It is anticipated that in two years' time, a further 4,000addresses will have been added to the list. In determining thevalue-in-use of the customer lists, how many addresses should betaken into account at the current date?(a) 15,000(b) 16,000(c) 20,000(d) 21,0007. Which of the following is the best evidence of an asset's fairvalue less costs to sell?(a) An asset that is trading in an active market.(b) The price in a binding sale agreement.(c) Information available that determines the disposal value of theasset in an arm's length transaction.(d) The carrying value of the asset.

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Description: 1. Inventory should be stated at(a) Lower of cost and fair value.(b) Lower of cost and net realizable value.(c) Lower of cost and nominal value.(d) Lower of cost and net selling price.2. Which of the following costs of conversion cannot be includedi

Answered: 1. Inventory should be stated at (a)…

Business

Accounting

1. Inventory should be stated at (a) Lower of cost and fair value. (b) Lower of cost and net realizable value. (c) Lower of cost and nominal value. (d) Lower of cost and net selling price.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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