INVENTORIES

PRE QUIZ

1. Inventories are assets defined by all of the following, except

a. Held for sale in the ordinary course of business
b. In the process of production for such sale
c. In the form of materials or supplies to be consumed in the production process or
the rendering of services
d. Used in the production or supply of goods and services for administrative
purposes
2. Entities must allocate the cost of all goods available le for sale between
a. The cost of goods on hand at the beginning and the cost of goods acquired
during the period.
b. The cost of goods on hand at the end and the cost of goods acquired during the
period.
c. The income statement and the statement of financial position
d. All of the choices are correct.
3. Why are inventories included in the computation of net income?
a. To determine cost of goods sold
b. To determine sales revenue
c. To determine merchandise returns
d. Inventories are not included in the computation of net income
4. When inventory is misstated, its presentation lacks
a. Relevance
b. Faithful representation
c. Comparability
d. All of the choices are correct
5. Which of the following costs should not be included as part of the cost inventory?
a. Abnormal freight
b. Import duties
c. Conversion costs
d. All of the choices are included as part of the cost of inventory
6. In a period of rising prices, the inventory method which tends to give the highest net
income is
a. Moving average
b. First-in, first-out
c. Specific identifications
d. Weighted average
7. The pricing of issues of inventory must be deferred until the end of the accounting period
under which of the following method of inventory valuation?
a. Moving average
b. Weighted average
c. Specific identification
d. FIFO
8. Why are inventories measured at lower of cost and net realizable value?
a. To report a loss when there is a decrease in the future utility.
b. To be conservative.
c. To report a loss when there is a decrease in the future utility below the original
cost.
d. To permit future profit to be recognized.
9. Which statement is true about the LCNRV method of measuring inventory?
a. The LCNRV is always either the net realizable value or cost
b. The LCNRV gives the lowest valuation if applied to individual items of inventory.
c. When the cost of goods sold method is used to record inventory at net realizable
value, the NRV is substituted for cost and the loss is buried in the cost of goods
sold.
d. All of these statements are true about LCNRV method.
10. The use of the gross profit method assumes
a. The amount of gross profit is the same as in prior years.
b. Sales and cost of goods sold have not changed from previous years.
c. Inventory value has not increased from previous years.
d. The relationship between selling price and cost of goods sold is similar in prior
years.
11. How is the gross profit method used as it relates to inventory valuation?
a. Verify the accuracy of the perpetual inventory records.
b. Verity the accuracy of the physical inventory.
c. To estimate cost of goods sold.
d. To provide an inventory value under LIFO.
12. Biological assets
a. Are found only in Biotech entities.
b. Are living animals or living plants and must be disclosed as a separate line item in
the statement of financial position
c. Must be valued at cost
d. Do not generally have future economic benefits
13. Agricultural activity includes all of the following, except
a. Raising livestock
b. Annual perennial cropping
c. Floriculture and aquaculture, including fishing
d. Ocean fishing
14. An inventory method which designed to approximate inventory valuation at the lower of
cost and net realizable value is
a. Average retail method
b. FIFO retail
c. Conventional retail method
d. LIFO retail
15. All of the following can be considered bearer plant, except
a. Coconut tree
b. Grape tree
c. Rubber tree
d. Tree in a forest plantation to be harvested and sold as log or lumber