Financial AccountingReceivables-MCQs

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

2. 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

3. 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?

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

5. 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.

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

7. 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?

8. 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?

9. 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?

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?