Question Chapter 04

A company determined the following values for its inventory as at the end of Its fiscal year: Historical cost $100,000 , current replacement cost 70,000 ,  Net realizable value 90,000 ,  Net realizable value less normal profit margin $85,000 and Fair value 95,000 under IFR5, what amount should the company report as inventory on its balance sheet?

• $70,000

• $85,000

• $95,000

• $90,000

Inventory excludes:

• Goods purchased for resale

• Finished goods produced

• Construction works in progress

• Raw materials

Shaw Q Co., imported raw materials from China worth $100,000. They paid $8,000 as import dues and $2,000 as Import taxes (the import taxes were subsequently refunded by the local government). They paid $15,000 for transport on of the materials from China and another $2,000 as port handling charges for loading the materials at China. Marketing expenses were $1,000 and the general administration overheads amounted to $2,000. What will be the value of Inventories as per IAS 27

• $127,000

• $125,000

• $128,000

• $130,000

Inventory should be measured at the lower of cost and ……………. 

• Fair value

• Market value

• Net realizable value

• Present value

Which of the following Is allowed as a cost of Inventory?

• Abnormal waste

• Storage costs

• Variable manufacturing overheads

• General  administration overheads

Which of the following cost models Is not premised under IAS 2?

• First In, First out (’FIFO’)

• Last in, Last out (‘LIFO’)

• Weighted Average

• Actual cost

Thunder Limited had inventory with a cost of $10,000 at the end of the financial period, 31 December 2013. It estimated the net realizable value of this inventory was $9,000 at 31December. one week later, the Inventory was sold for $7,000. If their financial statements were finalized on 14 February 2014, what value should be assigned to this inventory?

• $10,000

• $9,000

• $7,000

• None of these

Fixed Production overheads are those:

 

• Indirect costs of production that remain constant regardless of the volume of production

• Direct costs attributable to the product or service that remain constant regardless of the volume of production

• Indirect costs of production that vary directly with the volume of production

• Direct costs attributable to the product or service that vary regardless of the volume of production.

Zippy Machines Is in the business of procuring a specific type of machine and sells them to international markets. During the year, the Company bought four machines costing $120,000, $140,000, $130,000 and $100,000 respectively. During the year it sold only one machine for 5140,000 and follows the FIFO method of valuation. Which of the following statements is TRUE?

• The cost of Inventory is $370,000 and the cost of sales is $100,000

• The cast of Inventory is $390,000 and the cost of sales is $140,000

• The cost of Inventory Is $370,000 and the cost of sales is $120,000

• The cost of Inventory is $370,000 and the cost of sales Is $490,000

Sticky Corp manufacturers and sells adhesive warning signs for workplaces. The stock of signs was Included in the closing inventory as of 31December 2013 at a cost of $50 per pack.

During the annual audit the auditors noted that the subsequent selling price for the Inventory at 15th January 2014 was $40 per pack. Furthermore, Inquiry reveals that during the physical stock take, a water leakage has damaged the signs and glue. Accordingly in the following week, 5 Sticky Corp spent a total of $15 per pack for repairing and reapplying the glue to the Signs.

The net realizable value and inventory write-down (loss) amount to:

• $40 and $10 respectively

• $25 and $25 respectively

• $35 and $25 respectively

• $30 and $15 respectively