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WorksheetsMIDTERM QUIZ 1 (TF 8:30-10:00 AM)
Total questions: 20
Worksheet time: 20mins
Which statement is incorrect regarding cost formulas?
Specific identification of cost means that specific costs are attributable to identified inventory.
The FIFO formula assumes that the items of inventory that were purchased or produced last are sold first, and consequently the items remaining in inventory at the end of the period are those earlier purchased or produced.
Under the weighted average cost formula, the cost of each item is determined from weighted average of the cost of similar items at the beginning of each period and the cost of similar items purchased or produced during the period.
The average cost formula may be calculated on a periodic basis, or as each additional shipment is received, depending upon the circumstances of the entity.
When using the moving average method of inventory valuation, a new unit cost must be computed after each
purchase
issuance from inventory
purchase and issuance from inventory
month-end
A company acquired a building, paying a portion of the purchase price in cash and issuing a mortgage note payable to the seller for the balance. In a statement of cash flows, what amount is included in investing activities for the above transaction?
Cash payment
Acquisition price
Zero
Mortgage amount
A company acquired a building, paying a portion of the purchase price in cash and issuing a mortgage note payable to the seller for the balance. In a statement of cash flows, what amount is included in financing activities for the above transaction?
Cash payment
Acquisition price
Zero
Mortgage amount
When using the indirect method to prepare the operating section of a statement of cash flows, which of the following is added to net income to compute cash provided by/used by operating activities?
Increase in accounts receivable.
Gain on sale of land.
Amortization of patent.
All of the above are added to net income to arrive at cash flow from operating activities.
Of the following questions, which one would not be answered by the statement of cash flows?
Where did the cash come from during the period?
What was the cash used for during the period?
Were all the cash expenditures of benefit to the company during the period?
What was the change in the cash balance during the period?
The primary purpose of the statement of cash flows is to provide information
about the operating, investing, and financing activities of an entity during a period.
that is useful in assessing cash flow prospects.
about the cash receipts and cash payments of an entity during a period.
about the entity's ability to meet its obligations, its ability to pay dividends, and its needs for external financing.
In a statement of cash flows, interest payments to lenders and other creditors shall be classified as
operating activities
investing activities
lending activities
financing activities
In a statement of cash flows, interest received and dividend received may be classified alternatively as cash flow from
operating activities
investing activities
financing activities
borrowing activities
An entity shall report separately cash flows arising from investing and financing activities using
direct method
indirect method
either direct method or indirect method
neither direct method nor indirect method
Which of the following cash flows does not appear in the statement of cash flows using the indirect method?
net cash flow from operating activities
cash received from customers
cash inflow from sale of equipment
cash outflow for dividend payment
In a statement of cash flows, which of the following should be reported as a ash flow from financing activities?
I. Payment to settle mortgage notes
II. Interest payments on mortgage notes
III. Dividend payments to owners
I, II, and III
II and III only
I only
I and III only
In which of the following shall PAS 2 Inventories be applied?
Shares of stocks held for trading
Animals and plants that are managed and to be sold in the ordinary course of business
Inventory of a service provider consisting only of direct labor and overhead
Machinery acquired by a manufacturing entity for use in the production process
Which of the following are considered in determining the cost of an item of inventory?
I. Material wasted due to a machine breakdown
II. Import duties on shipping of inventory inwards
III. Storage costs of finished goods
IV. Trade discounts received on purchase of inventory
I and II only
III and IV only
II and IV only
I, II, III and IV
Who owns the goods in transit under FOB destination?
buyer
seller
either the seller or the buyer
none
Smurf Village Co.'s inventories consist of items that are not ordinarily interchangeable. According to PAS 2, which of the following cost formulas shall the entity use?
FIFO
Weighted Average
LIFO
Specific Identification
Write-downs of inventories to their net realizable value are recognized
in profit or loss
in other comprehensive income
directly in equity
any of these
Which statement is correct concerning the valuation of inventory at lower of cost or NRV?
I. Inventories are usually written down to net realizable value on an item by item basis.
II. It is appropriate to write down inventories based on a classification of inventory, for example, finished goods or all inventories in a particular industry or geographical segment.
I only
II only
Both I and II
Neither I nor II
Commodities of broker traders are measured at
fair value
fair value less cost to sell
cost
net realizable value
Which of the following statements related to LCNRV is correct?
I. Reversal of inventory write-downs may exceed the amount of the original write-down previously recognized.
II. Raw materials inventory is not written down below cost if the finished goods to which they will be be incorporated are expected to be sold at or above cost.
I only
II only
Both I and II
Neither I nor II
