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Inventories PAS 2 (Set 2: Inventory Estimation)

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Inventories PAS 2 (Set 2: Inventory Estimation)
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17 questions

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1.

OPEN ENDED QUESTION

3 mins • 1 pt

2 methods used to estimate inventories

Evaluate responses using AI:

OFF

Answer explanation

1. Gross profit method

2. Retail inventory method

2.

OPEN ENDED QUESTION

3 mins • 1 pt

Gross Profit Method Procedural Approach

Evaluate responses using AI:

OFF

Answer explanation

1. Determine the trend

2. Identify gross profit rate

3. Determine cost ratio

4. Determine net sales

5. Determine cost of goods sold

6. Identify ending inventory

7. Identify inventory loss

3.

OPEN ENDED QUESTION

3 mins • 1 pt

Retail Inventory Method Procedural Approach

Evaluate responses using AI:

OFF

Answer explanation

1. Determine cost ratio

2. Determine net sales

3. Identify ending inventory at retail

4. Identify ending inventory at cost

5. Determine cost of goods sold

4.

OPEN ENDED QUESTION

3 mins • 1 pt

Gross Profit Method

Step 1: Analyze the trend or pattern

Evaluate responses using AI:

OFF

Answer explanation

Analyze the given, find out if there is a pattern regarding the gross profit rate.

If you found one, apply it to identify the gross profit rate

5.

OPEN ENDED QUESTION

3 mins • 1 pt

Gross Profit Method

Step 2: Determine gross profit rate

Evaluate responses using AI:

OFF

Answer explanation

To identify gross profit rate,

1. Know the trend

2. If average gross profit is stated to be used,

Compute GP%:

Gross profit rate yr 1 + yr 2 + yr n

÷

Total number of years

3. If overall gross profit is stated to be used,

Compute GP%:

Gross Profit yr 1 + yr 2 + yr n

÷

Sales yr 1 + yr 2 + yr n

Additional notes:

- if problem is silent, overall gross profit is used.

6.

OPEN ENDED QUESTION

3 mins • 1 pt

Gross Profit Method

Step 3: Determine the net sales

Evaluate responses using AI:

OFF

Answer explanation

Gross sales

Less: sales returns

Or sales return & allowances

Net sales

Additional notes:

Sales discount & sales allowance are ignored.

7.

OPEN ENDED QUESTION

3 mins • 1 pt

Gross Profit Method

Step 4: Determine cost ratio

Evaluate responses using AI:

OFF

Answer explanation

Sales

Less: Cost (Cost ratio)

Gross Profit

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