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Commerce and BusinessbackBusinessbackFinancial AccountingbackFinancial Accounting and Reporting An International ApproachbackPractice Set 2490back

Inventory

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Question 1
Free
True/False

IAS 2 Inventories applies to biological assets related to agricultural activity.

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False

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Question 2
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True/False

Upward revaluation of inventory is permitted for as long as all assets in same inventory class are revalued.

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False

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Question 3
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True/False

Some biological assets may be covered by IAS 2 Inventories.

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False

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Question 4
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True/False

The definition of inventories includes assets in the form of materials or supplies to be consumed in the production process or in rendering of services.

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False

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Question 5
Free
True/False

IAS 2 requires that fixed manufacturing costs be excluded from the cost of inventories,as they cannot be allocated accurately.

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Question 6
True/False

Standard costs may be used to arrive at the cost of inventory only where standards are set at ideal levels and any costs arising from exceptional wastage are excluded from the cost of inventories.

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Question 7
True/False

The value of inventory reported in the financial statements under IAS 2 may be reported at an amount lower than its original cost.

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False
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Question 8
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The cost-flow assumption selected for inventory costing purposes should always reflect the physical flow of goods out of inventory.

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False
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Question 9
True/False

The only difference between IAS 2 and company law is that the 'international' standards allow inventory to be valued using LIFO.

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Question 10
True/False

The measurement of inventories is no different for not-for-profit entities.

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Question 11
True/False

Perpetual inventory system is also known as the physical inventory method.

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False
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Question 12
True/False

When reversing a previous period inventory write down,this would result in a debit entry to the inventory account.

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True
False
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Question 13
Multiple Choice

Which of the following is not a definition in IAS 2 on inventories?

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A
Assets in the form of materials or supplies to be consumed in the production process.
B
Assets in the process of production for sale.
C
Raw materials to be used in maintaining machines that prepare goods for sale.
D
Assets held for sale in the ordinary course of business.
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Question 14
Multiple Choice

IAS 2 on inventories does not apply to:

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A
trees held for sale as part of forestry operations.
B
work-in-progress under construction contracts.
C
agricultural produce of a biological asset.
D
any of the given answers.
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Question 15
Multiple Choice

According to IAS 2 inventories include assets:

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A
such as service contracts arising under construction contracts.
B
held over the long term for use in the production process.
C
such as financial instruments.
D
held in the process of production, preparation or conversion for sale.
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Question 16
Multiple Choice

IAS 2 requires that inventory is valued at:

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A
the lower of cost and recoverable value, on an item-by-item basis where practicable.
B
cost or fair value for classes of assets and services that are defined as inventories.
C
the lower of cost and net realisable value, on an item-by-item basis where practicable.
D
cost or deprival value, whichever is the lower, for classes of inventories.
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Question 17
Multiple Choice

IAS 2 provides that not-for-profit entities:

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A
must value their assets at the lower of cost or net realisable value to allow reports to be compared.
B
should only report inventories at cost for simplicity.
C
should value their assets at either cost or current replacement cost, whichever is more beneficial.
D
will record the inventories at the lower of cost or current replacement cost.
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Question 18
Multiple Choice

The cost of inventory is defined by IAS 2 as including:

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A
the cost of purchase and conversion.
B
duties and taxes on purchase of goods or services for sale.
C
the cost incurred in the normal course of operations to bring the inventories to their present location and condition.
D
all of the given answers.
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Question 19
Multiple Choice

Fixed production costs are those that,within normal operating limits:

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A
vary in relation to production volume by a fixed amount.
B
remain a constant per unit amount as volume changes.
C
vary in relation to the levels of input but remain constant at varying levels of output.
D
remain a constant amount at varying production volume levels.
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Question 20
Multiple Choice

The two main methods for dealing with fixed costs in relation to the production of inventory are:

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A
variable costing and incremental costing.
B
absorption costing and direct costing.
C
overhead costing and ABC costing.
D
relevant costing and incremental costing.
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