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
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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
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