Financial AccountingReceivables-MCQs

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

2. 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.

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

4. 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?

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. 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?

7. A company with an accounting date of 31 October carried out a physical check of inventory on 4 November 20X3, leading to an inventory value at cost at this date of $483,700.
Between 1 November 20X3 and 4 November 20X3 the following transactions took place:
1.  Goods costing $38,400 were received from suppliers.
2.  Goods that had cost $14,800 were sold for $20,000.
3.  A customer returned, in good condition, some goods which had been sold to him in October for $600 and which had cost $400.
4.  The company returned goods that had cost $1,800 in October to the supplier, and received a credit note for them.

What figure should appear in the company’s financial statements at 31 October 20X3 for closing inventory, based on this information?

8. What would conversion costs if costs of raw materials, direct labor costs, and manufacturing overhead costs $80,000, $50,000, and $60,000, respectively?

9. 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

10. 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?