Financial AccountingReceivables-MCQs

1. Which of the following statements about IAS 2 Inventories is correct?
Production overhead should be included in cost on the basis of a company’s normal level of activity in the period.
In arriving at the net realisable value of inventories, trade discounts and settlement discounts must be deducted.
In arriving at the cost of inventories, FIFO, LIFO and weighted average cost formulas are acceptable.
It is permitted to value finished goods inventories at materials plus labour cost only, without adding production overheads.

2. The inventory value for the financial statements of Global Co for the year ended 30 June 20X3 was based on a inventory count on 7 July 20X3, which gave a total inventory value of $950,000.

Between 30 June and 7 July 20X6, the following transactions took place.

What figure should be included in the financial statements for inventories at 30 June 20X3?

3. The closing inventory of X amounted to $116,400 excluding the following two inventory lines:
1    400 items which had cost $4 each. All were sold after the reporting period for $3 each, with selling expenses of $200 for the batch.
2    200 different items which had cost $30 each. These items were found to be defective at the end of the reporting period. Rectification work after the statement of financial position amounted to $1,200, after which they were sold for $35 each, with selling expenses totalling $300.

Which of the following total figures should appear in the statement of financial position of X for inventory?

4. The inventory value for the financial statements of Q for the year ended 31 December 20X4 was based on an inventory count on 4 January 20X5, which gave a total inventory value of $836,200.
Between 31 December and 4 January 20X5, the following transactions took place:

What adjusted figure should be included in the financial statements for inventories at 31 December 20X4?

5. Supervisor’s salary and equipment repair cost are examples of

6. IAS 2 Inventories defines the items that may be included in computing the value of an inventory of finished goods manufactured by a business.

Which one of the following lists consists only of items which may be included in the statement of financial position value of such inventories, according to IAS 2?

7. The closing inventory at cost of a company at 31 January 20X3 amounted to $284,700.

The following items were included at cost in the total:
1.      400 coats, which had cost $80 each and normally sold for $150 each.  Owing to a defect in manufacture, they were all sold after the reporting date at 50% of their normal price. Selling expenses amounted to 5% of the proceeds.
2.     800 skirts, which had cost $20 each. These too were found to be defective. Remedial work in February 20X3 cost $5 per skirt, and selling expenses for the batch totalled $800. They were sold for $28 each.

What should the inventory value be according to IAS 2 Inventories after considering the above items?

8. A company values its inventory using the first in, first out (FIFO) method. At 1 May 20X2 the company had 700 engines in inventory, valued at $190 each.

During the year ended 30 April 20X3 the following transactions took place:
20X2
01-Jul      Purchased 500 engines at $220 each
01-Nov     Sold 400 engines for $160,000
20X3
01-Feb      Purchased 300 engines at $230 each
15-Apr       Sold 250 engines for $125,000

What is the value of the company’s closing inventory of engines at 30 April 20X3?

9. The information below relates to inventory item Z.
March 1      50 units held in opening inventory at a cost of $40 per unit
17     50 units purchased at a cost of $50 per unit
31    60 units sold at a selling price of $100 per unit

Under AVCO, what is the value of inventory held for item Z at the end of March 31?

10. Which of the following costs may be included when arriving at the cost of finished goods inventory for inclusion in the financial statements of a manufacturing company?

1     Carriage inwards
2    Carriage outwards
3    Depreciation of factory plant
4    Finished goods storage costs
5    Factory supervisors’ wages