2. PAS 2 requires that the financial statements should disclose..... a. the total carrying amount of inventories and classification appropriate to the enterprise b. the accounting policies adopted in measuring inventories, including the cost formula AND the total carrying amount of inventories and classification appropriate to the enterprise c. the accounting policies adopted in measuring inventories, including the cost formula d. the accounting policies adopted in measuring inventories, including the cost formula OR the total carrying amount of inventories and classification appropriate to the enterprise 23. Perpetual inventory valuation system does not require.... a. physical count or measurement of inventory b. suspension of receipts and issue in the entire factory c. maintenance of inventory records d. suspension of receipts and issue in the entire factory, maintenance of inventory records and physical count or measurement of inventory. 24. Which of the following is the same as 'net realisable value' of inventory? a. proceeds of sale less all further marketing, selling and distribution costs b. average cost c. gross selling price d. replacement price 25. ......... concentrates on the physical linking of the particulars item sold. a. FIFO b. weighted average c. LIFO d. Specific Identification Method 26. XYZ Ltd. purchased 550 units of Material A @P 3.10 per unit on 16th August, 600 units @ P 3.50 on 18th August, 750 units @ P3.85 on 26th August and 500 units @ P 3.29 per unit on 2nd September. The company issued 450 units to production on 4th September @ P3.47 per unit. Discuss the method of inventory valuation followed by the company. a. Specific Identification Method b. FIFO c. LIFO d. weighted average 27. An undervaluation of previous year's opening inventory will..... a. none of these b. cause previous years net income to be overstated c. causes previous years net income to be understated d. cause current years net income to be overstated 28. If the sale is P2000 and the rate of profit on cost of goods sold is 25% then the cost of goods sold is.... a. 1500 b. 2000 c. 1600 d. 700 29. JA Baking purchased $1000 worth of goods at the start of the year. A fire in the warehouse destroyed $600 worth of the goods. Prepare the journal entry to account for the goods destroyed. a. Dr. Inventory $600 Cr. Impairment loss on inventory $600 b. Dr. Impairment loss on inventory $600 Cr. Cash at bank $600 c. Dr. Impairment loss on inventory $400 Cr. Inventory $400 d. Dr. Impairment loss on inventory $600 Cr. Inventory $600 30. Which of the following are possible reasons for impairment of inventory? (i) Inventories damaged by fire (ii) Theft of inventories (iii) Inventories obsolescence (iv) Inventories with very little demand a. All of the above b. (i), (ii) and (iii) c. (ii), (iii) and (iv) d. (i) and (ii) 31. JA Baking purchased $2 500 worth of goods at the start of the year. However, due to low demand, the net realisable value of the goods were only $2 000 at the end of year. Prepare the journal entry for the expense incurred. a. Dr. Inventory $2 500 Cr. Impairment loss on inventory $2 500 b. Dr. Impairment loss on inventory $500 Cr. Inventory $500 c. Dr. Impairment loss on inventory $2 000 Cr. Inventory $2 000 d. Dr. Inventory $4 500 Cr. Impairment loss on inventory $4 500 32. Which of the following costs are included in the cost of inventories? a. Abnormal material usage b. Transport costs for raw materials c. Storage costs relating to finished goods d. Administrative and general overhead 33. How should trade discounts be dealt with when valuing inventories at the lower of cost and net realisable value (NRV) according to PAS 2? a. Added to cost b. Deducted in arriving at NRV c. Ignored d. Deducted from cost 34. The Coronet Company has a cost card in relation to an item of goods manufactured as follows: Materials 70 Storage costs of finished goods 18 Delivery to customers (Freight out) 4 Non-recoverable purchase taxes 6 According to PAS 2, at what figure should the item be valued in inventory? ANSWER: _____ 35. Inventories are assets (choose the incorrect one) a. Held for sale in the ordinary course of business. b. In the process of production for sale. c. Held for use in the production or supply of goods or services. d. In the form of materials or supplies to be consumed in the production process or in the rendering of services.
2.
PAS 2 requires that the financial statements should disclose.....
a. the total carrying amount of inventories and classification appropriate to the enterprise
b. the accounting policies adopted in measuring inventories, including the cost formula AND the total carrying amount of inventories and classification appropriate to the enterprise
c. the accounting policies adopted in measuring inventories, including the cost formula
d. the accounting policies adopted in measuring inventories, including the cost formula OR the total carrying amount of inventories and classification appropriate to the enterprise
23.
Perpetual
a. physical count or measurement of inventory
b. suspension of receipts and issue in the entire factory
c. maintenance of inventory records
d. suspension of receipts and issue in the entire factory, maintenance of inventory records and physical count or measurement of inventory.
24.
Which of the following is the same as 'net realisable value' of inventory?
a. proceeds of sale less all further marketing, selling and distribution costs
b. average cost
c. gross selling price
d. replacement price
25.
......... concentrates on the physical linking of the particulars item sold.
a. FIFO
b. weighted average
c. LIFO
d. Specific Identification Method
26.
XYZ Ltd. purchased 550 units of Material A @P 3.10 per unit on 16th August, 600 units @ P 3.50 on 18th August, 750 units @ P3.85 on 26th August and 500 units @ P 3.29 per unit on 2nd September. The company issued 450 units to production on 4th September @ P3.47 per unit. Discuss the method of inventory valuation followed by the company.
a. Specific Identification Method
b. FIFO
c. LIFO
d. weighted average
27.
An undervaluation of previous year's opening inventory will.....
a. none of these
b. cause previous years net income to be overstated
c. causes previous years net income to be understated
d. cause current years net income to be overstated
28.
If the sale is P2000 and the rate of profit on cost of goods sold is 25% then the cost of goods sold is....
a. 1500
b. 2000
c. 1600
d. 700
29.
JA Baking purchased $1000 worth of goods at the start of the year. A fire in the warehouse destroyed $600 worth of the goods. Prepare the
a. Dr. Inventory $600 Cr. Impairment loss on inventory $600
b. Dr. Impairment loss on inventory $600 Cr. Cash at bank $600
c. Dr. Impairment loss on inventory $400 Cr. Inventory $400
d. Dr. Impairment loss on inventory $600 Cr. Inventory $600
30.
Which of the following are possible reasons for impairment of inventory?
(i) Inventories damaged by fire
(ii) Theft of inventories
(iii) Inventories obsolescence
(iv) Inventories with very little demand
a. All of the above
b. (i), (ii) and (iii)
c. (ii), (iii) and (iv)
d. (i) and (ii)
31.
JA Baking purchased $2 500 worth of goods at the start of the year. However, due to low demand, the net realisable value of the goods were only $2 000 at the end of year. Prepare the journal entry for the expense incurred.
a. Dr. Inventory $2 500 Cr. Impairment loss on inventory $2 500
b. Dr. Impairment loss on inventory $500 Cr. Inventory $500
c. Dr. Impairment loss on inventory $2 000 Cr. Inventory $2 000
d. Dr. Inventory $4 500 Cr. Impairment loss on inventory $4 500
32.
Which of the following costs are included in the cost of inventories?
a. Abnormal material usage
b. Transport costs for raw materials
c. Storage costs relating to finished goods
d. Administrative and general overhead
33.
How should trade discounts be dealt with when valuing inventories at the lower of cost and net realisable value (NRV) according to PAS 2?
a. Added to cost
b. Deducted in arriving at NRV
c. Ignored
d. Deducted from cost
34.
The Coronet Company has a cost card in relation to an item of goods manufactured as follows:
Materials 70
Storage costs of finished goods 18
Delivery to customers (Freight out) 4
Non-recoverable purchase taxes 6
According to PAS 2, at what figure should the item be valued in inventory?
ANSWER: _____
35.
Inventories are assets (choose the incorrect one)
a. Held for sale in the ordinary course of business.
b. In the process of production for sale.
c. Held for use in the production or supply of goods or services.
d. In the form of materials or supplies to be consumed in the production process or in the rendering of services.
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