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UNIVERSITY OF PERPETUAL HELP SYSTEM DALTA CALAMBA CAMPUS, BRGY. PACIANO RIZAL CALAMBA CITY, LAGUNA, PHILIPPINES Chapter 4 – PAS 2 INVENTORIES EDMUND E. HILARIO, CPA, MBA SYNTHESIS IN FIN ACCTG THEORY 1St SEMESTER 2019 – 2020 ================================================================================= MULTIPLE CHOICE PROBLEMS (PAS 2) 1.Inventories are assets (choose the incorrect one) a.Held for sale in the ordinary course of business. b.In the process of production for sale. c.In the form of materials or supplies to be consumed in the production process or in the rendering of services. d.Held for use in the production or supply of goods or services. 2.Inventories encompass all of the following, except a.Merchandise purchased by a retailer b.Land and other property not held for sale c.Finished goods produced d.Materials and supplies awaiting use in the production process 3.Inventories shall be measured at a.Cost b.Net realizable value c.Lower of cost or fair value less cost to sell d.Lower of cost or net realizable value 4.The cost of inventory shall comprise all of the following costs, except a.Cost of purchase b.Cost of conversion c.Other cost incurred in bringing the inventory to its present location and condition d. Abnormal amount of wasted material 5.The cost of purchase of inventory does not include a.Purchase price b.Import duties and taxes c.Freight, handling and other costs directly attributable to the acquisition of goods d.Trade discounts, rebates and other similar items 6.The costs of conversion of inventory include all of the following, except a.Costs directly related to the units of production, such as direct labor b.Systematic allocation of fixed production overhead c.Systematic allocation of variable production overhead d.Systematic allocation of administrative overhead 7.Which of the following costs of conversion cannotbe included in cost of inventory? a.Cost of direct labor b.Factory rent and utilities c.Salaries of sales staff (sales department shares the building with factory) d.Factory overhead based on normal capacity 8.Fixed production overheads include all of the following, except a.Indirect materials and indirect labor b.Depreciation of factory building c.Maintenance of factory equipment d.Cost of factory management and administrative 9.The allocation of fixed factory overhead to the cost of conversion is based on a.Normal capacity of the production facilities b.Actual use of the production facilities c.Either the normal capacity or actual use of the production facilities d.Relative sales value method 10.Costs that are incurred in bringing the inventories to their present location and condition are capitalized as cost of inventories and these include a.Cost of designing products for specific customers b.Abnormal amount of wasted material, labor and production cost c.Storage cost not necessary in the production process before a further production stage d.Selling cost 11.The cost of inventory shall be measured using a.FIFO b.Average method c. LIFO d.Either FIFO or average method 12.Net realizable value is a.Current replacement cost b.Estimated selling price c.Estimated selling price less estimated cost to complete d.Estimated selling price less estimated cost to complete and estimated cost to sell 13.Inventories are usually written down to net realizable value a. Item by itemc. By classification b.By totald. By segment 14.The amount of any write-down of inventory to net realizable value and all losses of inventory shall be a. Recognized as operating expense in the period the write-down or loss occurs. b.Recognized as other expense in the period the write- down or loss occurs. c.Recognized as component of cost of sales in the period the write-down or loss occurs. d.Deferred until the related inventory is sold. 15.The cost of inventories may not be recoverable under all of the following conditions, except a.The inventories are damaged. b. The estimated costs of completion or the estimated costs to sell have increased. c.The inventories have become wholly or partially obsolete. d.The selling prices have increased. 16.This costing method is appropriate for inventories that are segregated for a specific project and inventories that are not ordinarily interchangeable. a.Specific identificationc. Standard cost b.Relative sales priced. Net realizable value 17.The costs of inventory of a service provider include all of the following, except a.Labor and other costs of personnel directly engaged in providing the service. b. Compensation of supervisor personnel directly engaged in providing the service. c.Attributable overhead incurred in providing the service d.Profit margin factored into the price charged against the customer by the service provider. 18.The inventory of a service provider may simply be described as a.Work in progressc. Unbilled services b.Billed servicesd. Services inventory 19.When agricultural crops have been harvested or mineral ores have been extracted and a sale is assured under a forward contract or government guarantee, such inventories are measured at a.Net realizable valuec. Cost b.Standard costd. Relative sales price ================================================================================================== Page 1 of 6 Why is this page out of focus?This is a Premium document. Become Premium to read the whole document. Why is this page out of focus?This is a Premium document. Become Premium to read the whole document. Which costs should be included in valuing the inventory of a manufacturing company?A manufacturer's inventory valuation will include the costs of production, namely direct materials, direct labor, and manufacturing overhead.
Which one of the following is not included in the cost of inventory?Storage cost is not included in the cost of inventory.
Which costs are included for the purpose of valuation of inventory?Inventory valuation allows you to evaluate your Cost of Goods Sold (COGS) and, ultimately, your profitability. The most widely used methods for valuation are FIFO (first-in, first-out), LIFO (last-in, first-out) and WAC (weighted average cost).
What should be included in the cost of inventory?The cost of inventory includes the cost of purchased merchandise, less discounts that are taken, plus any duties and transportation costs paid by the purchaser.
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Which of the following cost should not be included in the inventory valuation of a manufacturing business?
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