QUIZ 1 - FINANCIAL ACCOUNTING II

Which of the following does the cost of inventories comprise?

I. Costs of purchase.

II. Costs of conversion.

III. Costs incurred in bringing the inventories to their present location.

IV. Costs incurred in bringing the inventories to their present condition.

• I and III only

• I, II and IV only

• II and III only

• All are the elements of inventories

Which of the statement is TRUE?

I. Opening inventory & closing inventory both are included under cost of goods sold in statement of profit & loss.

II. Opening inventory & closing inventory both are appeared as current asset in statement of financial position.

III. Opening inventory is appeared as current asset in statement of financial position.

IV. Closing inventory is appeared as current asset in statement of financial position.

• I and IV only

• I, III, and IV only

• II and III only

• All of the above

Costs which MUST be excluded from the cost of inventory are:

I. Selling price.

II. Storage costs.

III. Abnormal waste of materials, labour or other costs.

IV. Administrative overheads.

• I and II only

• I, II and IV

• I and IV only

• I, II, III and IV

Which of the following criteria met the requirement of MRFS102 for an item to be recognised as an inventories?

• The item is held for sale in the ordinary course of business.

• In the process of production for such sale.

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

• All of the above.

Which of the following statements define the term ‘Net Realisable Value’?

• The estimated selling price in the ordinary course of business plus the estimated costs of completion less the estimated costs necessary to make the sale.

• The revenue expected to be earned in the future when the goods are sold, less any selling costs.

• The estimated cost of completion less selling price in the ordinary course of business.

• The estimated costs necessary to make the sale plus selling price in the ordinary course of business less the estimated costs of completion.

The advantages of adopting perpetual inventory records are as follows, EXCEPT

• There is better information for inventory control.

• Excessive build-up of certain lines of inventory whilst having insufficient inventory of other lines is avoided.

• Less work is needed to calculate inventory at the end of the accounting period.

• They are cheaper inventory records compare to periodic system.