Free Printable AC233_Chap 4

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AC233_Chap 4_Inventory

Total questions: 25

Worksheet time: 2hrs 34mins

Name

Class

Date

An item of inventory was purchased for $20. The selling price has fallen to $14 and further costs of $2 will be incurred before sale.

What is the net realisable value of the inventory?

Spain has incorrectly included closing inventory in its financial statements at $32,943 instead of $37,642.

What is the result of the error and the necessary correction?

Profit is understated by $4,699

To correct: Dr Inventory $4,699, Cr Cost of Goods Sold $4,699

Profit is overstated by $4,699

To correct: Dr Inventory $4,699, Cr Cost of Goods Sold $4,699

Profit is overstated by $4,699

To correct: Dr Cost of Goods Sold $4,699, Cr Inventory $4,699

Profit is understated by $4,699

To correct: Dr Cost of Goods Sold $4,699, Cr Inventory $4,699

Class:At the end of its accounting period a business erroneously excluded goods bought on credit from its closing inventory. It also failed to record the purchase of those goods in its accounting records.

The effect of these omissions is to understate which of the following?

Cost of sales and current assets

Gross profit and current liabilities

Current assets only

Current assets and current liabilities

According to IAS 02, inventories are measured at:

Cost only

Net Realizable Value only

The lower of Cost or Net Realizable Value

The higher of Cost or Net Realizable Value

Which of the following is NOT included in the definition of inventories according to IAS 02?

Assets held for sale in the ordinary course of business

Assets in the process of production for sale

Materials or supplies to be consumed in production

Long-term assets used in the production process

Net Realizable Value (NRV) is calculated as:

Estimated selling price plus estimated costs of completion

Estimated selling price minus estimated costs of completion and costs necessary to make the sale

Estimated selling price plus costs necessary to make the sale

Historical cost minus accumulated depreciation

Which of the following is NOT typically included in the cost of inventory?

Purchase price

Import duties

Trade discounts received

Costs of bringing inventory to present location

For purchases of goods costing $500 subject to sales tax at 15%, the correct journal entry to record the credit purchase would debit Inventory for:

$500

$575

$425

$650

Using the periodic inventory system, Cost of Goods Sold (COGS) is calculated as:

Opening Inventory + Purchases - Closing Inventory

Opening Inventory - Purchases + Closing Inventory

Closing Inventory + Purchases - Opening Inventory

Opening Inventory + Closing Inventory - Purchases

10.

If beginning inventory is $1,500, purchases are $21,000, sales are $25,000, and ending inventory is $3,000, what is the gross profit?

$3,500

$5,500

$6,500

$4,500

11.

Which inventory costing method is most appropriate for items that are not ordinarily interchangeable?

FIFO

Specific Identification

Average Cost

LIFO

12.

In the FIFO method, the cost of goods sold is based on:

The most recently purchased items

The oldest purchased items

An average of all purchased items

The specific identification of items sold

13.

The weighted average cost method:

Assigns the same unit cost to all units

Assigns different costs based on purchase date

Assigns costs based on specific identification

Is not recognized under IAS 02

14.

In a periodic inventory system, the journal entry to record the closing inventory includes:

Debit Inventory, Credit Cost of Goods Sold

Debit Cost of Goods Sold, Credit Inventory

Debit Purchases, Credit Inventory

Debit Inventory, Credit Purchases

15.

Which of the following is NOT a step in the periodic inventory system at the end of the period?

Remove the Opening Inventory

Close off the Purchases Account

Post the Closing Inventory

Adjust the Inventory account daily

16.

A merchandising company's inventory typically consists of:

Raw materials, work in process, and finished goods

Only finished goods

Only raw materials

Work in process and finished goods

17.

When recording a sales transaction in a periodic inventory system, which account is NOT affected?

Sales

Trade Receivable

Inventory

Cash (if cash sale)

18.

If beginning inventory is $2,000, purchases are $15,000, and ending inventory is $3,000, the cost of goods sold is:

$14,000

$16,000

$12,000

$10,000

19.

Which of the following costs would NOT be included in bringing inventory to its present location and condition?

Import duties

Transport costs

Advertising costs

Handling costs

20.

In a manufacturing company, what type of inventory represents products that have been started but not yet completed?

Raw materials

Work in process

Finished goods

Merchandise inventory

21.

Gross profit is calculated as:

Sales minus Cost of Goods Sold

Sales minus Operating Expenses

Sales minus (Cost of Goods Sold + Operating Expenses)

Sales minus (Cost of Goods Sold - Closing Inventory)

22.

When using the average cost method, the cost per unit is:

Based on the first items purchased

Based on the last items purchased

A weighted average of all purchase costs

The median cost of all purchases

23.

Which of the following journal entries correctly records the removal of opening inventory in a periodic system?

Debit Inventory, Credit Cost of Goods Sold

Debit Cost of Goods Sold, Credit Inventory

Debit Purchases, Credit Cost of Goods Sold

Debit Cost of Goods Sold, Credit Purchases

24.

Which of the following statements about inventory records for financial accounting purposes are correct?

When continuous inventory records are kept, there is no need to count physical quantities
When physical quantities are recorded at the period end, there is no need to maintain continuous records

1 only

2 only

Both 1 and 2

Neither 1 nor 2

25.

After the profit and loss of Santa had been prepared, some inventory was found at the back of the warehouse which had been excluded from the physical count. The inventory had a value of $100.

How does the necessary adjustment affect gross profit and assets?

Gross profit increase and Assets decrease

Gross profit decrease and Assets decrease

Gross profit decrease and Assets increase

Gross profit increase and Assets increase

100 %

AC233_Chap 4_Inventory

Total questions: 25

Worksheet time: 2hrs 34mins

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