chapter 7 - inventory

Which of the following is best to describe an inventory?

• Non current asset a business owned

• An asset that is being held in business

• Assets owned by business with purpose of selling to the customer

• a service or product of a business

Business purchased goods costing $500 from credit supplier. Prepare the journal entry.

• Debit Inventory $500 -

  Credit Suppliers (Trade Payable) $500

• Debit Trade receivable $500 -

  Credit Inventory $500

• Debit Impairment loss on inventory $500 -

  Credit Inventory $500

• Debit Inventory $500 -

  Credit Cash at bank $500

ABC purchased inventory on account to a supplier in the amount of $400. The correct journal entry is:

• Inventory (Debit) $400 - Cash (Credit) $400

• Inventory (Debit) $400 - Suppliers (Accounts Payable) (Credit) $400

• Inventory Expense (Debit) $400 -Accounts Payable (Credit) $400

• Inventory Expense (Debit) $400 - Cash (Credit) $200 - Accounts Payable (Credit) $200

Explain the Last-in, first-out (LIFO) method and its application in inventory accounting.

• The LIFO method assumes that the first items purchased are the first ones sold, and it is used in inventory accounting to match the cost of the most recently acquired inventory against revenue first.

• The LIFO method assumes that the middle items purchased are the first ones sold, and it is used in inventory accounting to match the cost of the oldest acquired inventory against revenue first.

• The LIFO method assumes that the last items purchased are the first ones sold, and it is used in inventory accounting to match the cost of the most recently acquired inventory against revenue first.

• The LIFO method assumes that the most expensive items purchased are the first ones sold, and it is used in inventory accounting to match the cost of the cheapest acquired inventory against revenue first.

Which is the following the types of inventory accounting system?

• FIFO, LIFO, AVCO

• Cost Vs NRV

• periodic and perpetual

i. COGS determined at the end of accounting period

ii. suits business selling high-volumes product at different outlets

iii. e.g ; carrefour, giant

Which of the following concepts do these features belong to?

• perpetual inventory system

• definition of NRV

• periodic inventory system

• definition of inventory

Which of the following does the cost of Inventory comprise?

• Cost of purchase

• Cost of conversion

• Costs incurred in bring the inventories to their present location

• All of the above

Which of the following cannot be included in the cost of inventories?

• The cost of abnormal waste of materials and labour

• Variable production overheads

• Fixed production overheads

• Irrecoverable import duties payable on acquisition of inventories.

Which of the following is method used to update inventory balances periodically instead of constantly?

• Manufacturing Inventory

• Merchandise Inventory

• Periodic Inventory System

• Perpetual Inventory System

Which of the following is method used to continuously track inventory amounts?

• Manufacturing Inventory

• Merchandise Inventory

• Periodic Inventory System

• Perpetual Inventory System