Financial AccountingReceivables-MCQs

1. S sells three products – Basic, Super and Luxury. The following information was available at the year end.

What is the value of inventory at the year end?

2. Which of the following statements about the valuation of inventory are correct, according to IAS 2 Inventories?
1      Inventory items are normally to be valued at the higher of cost and net realisable value.
2     The cost of goods manufactured by an entity will include materials and labour only. Overhead costs cannot be included.
3     LIFO (last in, first out) cannot be used to value inventory.
4     Selling price less estimated profit margin may be used to arrive at cost if this gives a reasonable approximation to actual cost.

3. 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?

4. In preparing its financial statements for the current year, a company’s closing inventory was understated by $300,000.

What will be the effect of this error if it remains uncorrected?

5. You are preparing the financial statements for a business. The cost of the items in closing inventory is $41,875.  This includes some items which cost $1,960 and which were damaged in transit.

You have estimated that it will cost $360 to repair the items, and they can then be sold for $1,200.

What is the correct inventory valuation for inclusion in the financial statements?

6. An inventory record card shows the following details.

February 1      50 units in stock at a cost of $40 per unit
7      100 units purchased at a cost of $45 per unit
14        80 units sold
21        50 units purchased at a cost of $50 per unit
28        60 units sold

What is the value of inventory at 28 February using the FIFO method?

7. 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?

8. 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?

9. Which of the following is/are inventory valuation method(s)?

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