ACC 4223 - QUIZ 2 - INVENTORIES

Which of the following best defines an inventory?

• Tangible assets held for sale in the ordinary course of business, in the process of production, or in the form of raw materials or supplies to be consumed in the production process or in the rendering of services.

• Tangible and/or intangible assets held for sale in the ordinary course of business.

• Assets held for sale in the ordinary course of business, in the process of production for such sale, or in the form of materials or supplies to be consumed in the production process or in the rendering of services.

• Assets held for sale, in the process of production, or in the form of raw materials or supplies to be consumed in the production process.

How is the cost of inventory calculated?

• Cost of purchase and production costs

• Costs of purchase, costs of conversion (e.g. allocated production of overheads) and other costs incurred in bringing the inventory to their present location and condition

• Not possible to calculate without full information

• All direct and indirect costs relating to production (also called production overhead)

An entity purchased goods for sale on 1 October 2020 for RM55,000. The goods are normally purchased on 60-day credits. However as a special promotion of 10% discount if the purchase commitment for theses goods are to be made in full on 31 October 2020. For these goods, there is a delivery charge of RM1,200. Calculate the cost of the inventory.

• RM 56,200

• RM 50,580

• RM 50,700

• RM 55,000

Houses for sale built by a housing developer should be classified as:

• Inventory

• Investment property

• Financial asset

• Property, plant and equipment

Use the following information for questions 5 - 7:

A company purchased merchandise to be resold at increasing costs during the month March 2020. The purchases were made at the following costs:

Assuming the FIFO periodic valuation method is applied, what will be the company's closing inventory value as at 31st March 2020?

• RM 540

• RM 500

• RM 535

• RM 475

Assuming the FIFO periodic valuation method is applied, what will be the company's cost of sales for the month of March 2020?

• RM 660

• RM 605

• RM 585

• RM 530

Assuming the periodic weighted-average valuation method is applied, what is the company's closing inventory per unit as at 31st March 2020?

• RM 12.00

• RM 10.00

• RM 11.20

• RM 10.67

The following are the method of inventory valuation, EXCEPT:

• FIFO

• WAVCO

• LIFO

• Periodic System

The following are the benefits of inventory management, EXCEPT:

• Took much time during Stocktake

• Improves the accuracy of inventory orders

• Keeps your customers coming back for more

• Helps save time and money

Ahmad Enterprise has three items of inventory on hand at the end of its accounting period. Their cost and NRV are as follows:

• RM 244

• RM 280

• RM 315

• RM 279