Financial AccountingReceivables-MCQs

1. 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?

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. 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?

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. 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?

6. 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

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

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 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.

10. 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?