Financial AccountingReceivables-MCQs

1. 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?

2. The financial year of Mitex Co ended on 31 December 20X1. An inventory count on January 4 20X2 gave a total inventory value of $527,300.
The following transactions occurred between January 1 and January 4.

What inventory value should be included in Mitex Co’s financial statements at 31 December 20X1?

3. 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?

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

5. 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?

6. 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?

7. 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.

8. 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?

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. 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?