AS 2 - VALUATION OF INVENTORIES

Which of the following is included in cost of inventory as per AS-2?

• Duties and taxes subsequently recoverable from taxing authorities

• Freight inwards

• Rebates

• Duty drawbacks

Which of the following method of inventory valuation is not recommended by AS-2?

• Specific Identification Method

• First—in—First Out Method

• Weighted Average Cost Method

• Last—in—First Out Method

Which of the following statements is correct with respect to inventories?

• The FIFO method assumes that the costs of the earliest goods acquired are the last to be sold.

• It is generally good business management to sell the most recently acquired goods first.

• Under FIFO, the ending inventory is based on the latest units purchased.

• FIFO is a specific identification costing method.

If closing stock is overstated ____?

• Profit will increase and current assets will decrease

• Profit will decrease and current assets will increase

• Both profit & current assets will increase

• Both profit & current assets will decrease

As per AS-2, inventories should be valued at:

(1) Cost

(2) Net Realizable Value

Select the correct answer from the options given

• (1) only

• Higher of (1) and (2)

• (2) only

• Lower of (1) and (2)

Inventory account should be classified in which section of a balance sheet?

• Current assets

• Investments

• Property, plant and equipment

• Intangible assets

Identify the statement(s) which is incorrect.

• Storage costs which is a necessary part of the production process is included in inventory valuation.

• Administration overheads are never included in inventory valuation.

• Full amount of variable production overheads incurred are included in inventory valuation

• Administration overheads are always included in inventory valuation.

Materials and other supplies held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be____?

• sold at or above cost.

• sold above cost.

• sold less than cost.

• sold at market value(where market value is more than cost).

Pawan and-Vikas are partners in firm sharing profits and losses in the ratio of 4: 3.

If the value of Inventory reflected in the above balance sheet is overvalued by 25%, find out the value of inventory to be shown in the new Balance Sheet.

• Rs. 1,60,000

• Rs. 2,00,000

• Rs. 2,40,000

• Rs. 2,50,000

Computer software for a computer-controlled machine tool that cannot operate without that specific software is an integral part of the related hardware and is treated as_____.

• Intangible asset

• Inventory

• Property, plant and equipment

• Current asset other than inventory