The Valuation of Stock

Stock should be included in the balance sheet at . . .

• its cost.

• its net realisable value.

• the lower of its total cost and its total net realisable value.

• the lower of its cost and its net realisable value on an item-by-item or category­ by-category basis.

A firm has two categories of stock. The cost and net realisable value (NRV) of each are as follows.

The figure to be included in the firm's balance sheet, in respect of stock, is:

• £44,000

• £47,000

• £57,000

• £60,000

The net realisable value of an item of stock is its actual or estimated selling price . . .

• plus all further costs to completion and all costs to be incurred In marketing, selling and distributing the item.

• less all further costs to completion.

• less all further costs to completion and all costs to be incurred in marketing, selling and distributing the item.

• None of the above.

If an item of stock which originally cost £1,420 can be sold for £1,600, after incurring further completion costs of £110 and advertising costs of £130, then it should be included in the balance sheet stock valuation at:

• £1,360

• £1,420

• £1,490

• £1,600

The valuation of stock at the lower of its cost and its net realisable value is an application of . . .

• the consistency concept.

• the going concern concept.

• the prudence concept.

• the accruals concept.

The abbreviation 'FIFO' means . . .

• Fixed Income Financial Operations.

• Final Interest-Free Option.

• The First-In-First-Out method of approximating the cost of stock.

• None of the above.

The abbreviation 'LIFO' means . . .

• Large Integrated Financial Organisation.

• Least Interesting Financial Option.

• The Last-In-First-Out method of approximating the cost of stock.

• None of the above.

Which of the following is not nonnally acceptable as a basis for approximating the cost of stock when publishing financial statements ?

• The first in, first out (FIFO) method.

• The last in, first out (LIFO) method.

• The weighted average cost method.

• None of the above.

Under which of the following methods of approximating the cost of stock are the oldest stock costs incurred unlikely to have an effect on the closing stock valuation ?

• The first in, first out (FIFO) method.

• The last in, first out (LIFO) method.

• The weighted average cost method.

• None of the above.

If prices fall consistently throughout an accounting period, the method of approximating the cost of stock which will give the highest value to closing stock is:

• The first in, first out (FIFO) method.

• The last in, first out (LIFO) method.

• The weighted average cost method.

• None of the above.