PAS 2 Inventories

Which of the following costs are included in the cost of inventories?

• Transport costs for raw materials

• Abnormal material usage

• Storage costs relating to finished goods

• Administrative and general overhead

How should trade discounts be dealt with when valuing inventories at the lower of cost and net realisable value (NRV) according to PAS 2?

• Added to cost

• Ignored

• Deducted in arriving at NRV

• Deducted from cost

The Coronet Company has a cost card in relation to an item of goods manufactured as follows:

Materials 70

Storage costs of finished goods 18

Delivery to customers (Freight out) 4

Non-recoverable purchase taxes 6

According to PAS 2, at what figure should the item be valued in inventory?

• 88

• 76

• 98

• 94

Inventories are measured at

• Lower of cost and fair value

• Lower of cost and net realizable value

• Lower of cost and nominal value

• Lower of cost and net selling price

When using a perpetual inventory system,

• no Purchases account is used.

• a Cost of Goods Sold account is used.

• two entries are required to record a sale.

• all of these.

Goods in transit which are shipped f.o.b. shipping point should be

• included in the inventory of the seller

• included in the inventory of the buyer

• included in the inventory of the shipping company

• none of these

The following information applied to Flynn, Inc. for 2004:

Merchandise purchased for resale P400,000

Freight-in 16,000

Freight-out 10,000

Purchase returns 4,000

Flynn's 2004 inventoriable cost was

• P400,000

• P406,000

• P412,000

• P422,000

Tysen Retailers purchased merchandise with a list price of P90,000, subject to trade discounts of 20% and 10%, with no cash discounts allowable. Tysen should record the cost of this merchandise as

• P63,000

• P64,800

• P70,200

• P90,000

Inventories of commodity broker-traders are measured at

• fair value

• cost

• net realizable value

• fair value less costs to sell

Inventories are assets (choose the incorrect one)

• Held for sale in the ordinary course of business.

• In the process of production for sale.

• In the form of materials or supplies to be consumed in the production process or in the rendering of services.

• Held for use in the production or supply of goods or services.