INTACC

• 1. Which of the following should not be taken into account when determining the cost of inventory?


  Storage costs of part-finished goods

  Trade discounts

  Recoverable purchase taxes

  Import duties on shipping of inventory inward
• The cost of inventor does not include?

  • Storage cost necessary in the production process before a further production stage
  • Salaries of factory staff b.
  • Abnormal amount of wasted materials
  • Irrecoverable purchase taxes
• 3. Which of the following costs of conversion cannot be included in cost of inventory?

  Cost of direct labor

  Factory rent and utilities

  Salaries of sales staff

  Factory overhead based on normal capacity
• Which of the following should be taken into account when determining the cost of inventory?

  • Storage cost of part-finished goods
  • Abnormal freight in
  • Recoverable purchase tax
  • Interest on inventory loan
• Costs incurred in bringing the inventory to the present location and condition include

  • Cost of designing product for specific customers
  • Abnormal amount of wasted material
  • Storage cost not necessary in the production process before a further production stage
  • Distribution cost
• 6. Inventories encompass all of the following, except

  • Merchandise purchased by a retailer
  • Land and other property not held for sale
  • Finished goods produced

  Materials and supplies for use in production
• 7. A property developer must classify properties that it holds for sale in the ordinary course of business as

  • Inventory
  • Financial asset
  • Property, plant and equipment
  • Investment property
• Factory supplies to be consumed in the production process are reported as

  • Inventory
  • Investment property
  • Property, plant and equipment
  • Prepaid expenses
• Which of the following should not be reported as inventory?


  • Land acquired for resale by a real estate firm
  • Shares and bonds held for resale by a brokerage firm
  • Partialy completed goods held by a manufacturing entity
  • Machinery acquired by a manufacturing entity
• When determining the cost of an inventory, which of the following should not be included?

  • Interest on loan obtained to purchase the inventors
  • Commission paid when inventory is purchased
  • Labor cost of the inventory when manufactured
  • Depreciation of plant equipment used in manufacturing
• Theoretically, cash discounts permitted should be

  • Added to other income, whether taken or not b
  • Added to other income, only if taken
  • Deducted from inventory, whether taken or not
  • Deducted from inventory, only if taken
• Which of the following generally would not be separately accounted for in the computation of cost of goods sold?

  • Trade discounts applicable to purchases
  • Cash discounts taken
  • Purchase returns and allowances
  • Cost of transportation for merchandise purchased
• 3. The use of purchase discount account implies that the recorded cost of a purchased inventory is

  • Invoice price
  • Invoice price less the purchase discount taken
  • Invoice price plus any purchase discount lost
  • Invoice price less the purchase discount allowable whether taken or not
• The use of a discount lost account implies that cost of a purchased inventory is

  • Invoice price
  • List price
  • Invoice price less the purchase discount taken
  • Invoice price less the purchase discount allowable whether or not taken
• The valuation of inventory on a prime cost basis

  • Would achieve the same results as direct costing
  • Would exclude all overhead from inventory cost
  • Is always achieved when standard costing is adopted
  • Is always achieved when the FIFO is adopted
• IFRS prohibits which cost flow assumption?

  • LIFO
  • Specific identification
  • Weighted average
  • Any of these cost flow assumptions is allowed
• 2. What is the inventory pricing procedure in which the inventory?

  oldest costs rarely have an effect on the ending

  • FIFO
  • LIFO
  • Specific identification
  • Weighted average
• In a period of falling prices which inventory method generally provides the lowest amount of ending inventory?

  • Weighted average
  • FIFO
  • Moving average
  • Specific identification
• Which inventory cost flow assumption would consistently result in the highest income in a period of rising prices or inflation?

  • FIFO
  • LIFO
  • Weighted average
  • Specific identification
• The costing of inventory must be deferred until the end of reporting period under which of the following method of inventory valuation?

  • Moving average
  • Weighted average
  • LIFO perpetual
  • FIFO perpetual
• Cost of goods sold is the same under periodic system and perpetual system using

  • FIFO
  • LIFO
  • Weighted average
  • Specific identification
• The cost of inventories that are not ordinarily interchangeable and goods produced and segregated for specific projects shall be measured using

  • Average method
  • LIFO
  • Specific identification
  • FIFO
• Which is the reason why the specific identification method may be considered ideal for assigning cost to inventory and cost of goods sold?

  • The potential for manipulation of net income is reduced.
  • There is no arbitrary allocation of cost.
  • The cost flow matches the physical flow.
  • It is applicable to all types of inventory.
• Which of the following is likely to be a circumstance where the specific identification method can be used?

  • Inventory turnover is low
  • Inventory quantities are large.
  • Unit price is low.
  • All of the choices are likely circumstances.
• Which cost flow assumption is used for inventory when an entity builds townhouses?

  • FIFO
  • Weighted average
  • Specific identification
  • Any of these cost flow assumptions
• Which inventory method would report most closely the current cost of inventory?

  • FIFO
  • Specific identification
  • Weighted average
  • LIFO
• Which inventory method would report most closely the current cost of inventory?

  • FIFO
  • Specific identification
  • Weighted average
  • LIFO
• During periods of rising prices, when the FIFO method is used, a perpetual inventory system would

  • Not be permitted.
  • Result in a higher ending inventory than a periodic inventory system.
  • Result in the same ending inventory as a periodic inventory system.
  • Result in a lower ending inventory than a periodic inventory system.
• Which method of inventory pricing best approximates specific identification of the actual flow of costs and units?

  • LIFO
  • FIFO
  • Moving average
  • Weighted average
• Assuming no beginning inventory, what can be said about the trend of inventory prices if cost of goods sold computed using the FIFO method exceeds cost of goods sold using the average cost method?

  • Prices decreased
  • Prices remained unchanged
  • Prices increased
  • Price trend cannot be determined from the information
• Net realizable value is

  • Current replacement cost

  Estimated selling price

  Expected selling price less expected cost to complete and cost of disposal

  Estimated selling price less estimated cost to complete and cost of disposal
• Inventories are usually written down to net realizable value

  • Item by item
  • By classification
  • By total
  • By segment
• LCNRV is best described as the

  • Reporting of a loss when there is a decrease in the future utility below the original cost.
  • Method of determining cost of goods sold.
  • Assumption to determine inventory flow.
  • Change in inventory value to net realizable value.
• LCNRV of inventory

  • Is always either the net realizable value or cost.
  • Must be equal to estimated selling price less cost to complete and cost of disposal.
  • May sometimes be less than net realizable value.
  • Must be equal to net realizable vlaue.
• Which statement is true regarding inventory writedown and reversal of writedown?

  • Reversal of inventory writedown is prohibited.
  • Separate reporting of reversal of inventory writedown is required.
  • An entity is required to record an inventory writedown in a separate loss account. • allof the choices are correct.
• How should tade discounts be dealt with when valuing inventories at the lower of cost and net realizable value

  • Added to cost
  • Ignored
  • Deducted in arriving at cost
  • Deducted in arriving at NRV
• How should prompt payment discount be dealt with when valuing inventories at LCNRV?

  • Added to cost
  • Deducted in arriving at NRV
  • Ignored
  • Deducted from cost
• How should sales staff commission be dealt with when valuing inventories at LCNRV?

  • Added to cost
  • Deducted from cost
  • Deducted in arriving at NRV
  • Ignored
• How should import duties be dealt with when valuing inventories at LONRV?

  • Added to cost
  • Ignored

  1. Deducted in arriving at NRV
  2. Deducted from cost
• Inventories shall be measured at

  • Lower of cost and net realizable value
  • Cost
  • Net realizable value
  • Lower of cost and fair value