(a) Finished stock In Finished stock out (b) Fabrications Inward Fabrications
Outward (c) Final Input Final Output (d) First In First Out (a) Current asset (b) Current liability (c) Long-term asset (d) Stockholder's equity
(a) Average (b) LIFO (c) FIFO (d) Perpetual (a) More merchandise was purchased then the amount sold to customer (b) Less
merchandise was purchased then sold to the customer (c) Not all purchases were cash (d) Cash payments were more than purchases on account (a) Periodic inventory system (b) Contingency inventory system (c) LIFO (d) Perpetual inventory system 6. What is the principal criterion used to distinguish between tangible assets and inventories?(a) The physical substance of the asset (b) The acquisition cost of the asset (c) The nature of the company’s activity, which determines the purpose for which the asset is held (d) The moment in the accounting period when the asset is acquired 7. Which of the following method is suitable for calculating the cost of inventory when actual costs of individual units of merchandise can be determined from the accounting records?(a) FIFO Method (b) LIFO Method (c) Specific Identification Method (d) Average Method 8. The inventories are recorded at the latest price but the production cost is changed old cost price?(a) FIFO (b) Average (c) Both A & B (d) None 9. Which one of the following methods for inventory valuation may be misleading when the units are identical?(a) FIFO Method (b) LIFO Method (c) Specific Identification Method (d) None 10. During September, Khan had sales of 148,000, which made a gross profit of 40,000. Purchases amounted to 100,000 and opening inventory was 34,000. The value of closing inventory was?(a) Rs. 24,000 (b) Rs. 26,000 (c) Rs. 42,000 (d) Rs. 54,000 Inventory Valuation (1-10)
MCQs 11-20Click The Option and See Result11. Which type of inventory system requires updating the inventory balance at the end of the accounting period?(a) Periodic inventory system (b) LIFO (c) Perpetual inventory system (d) FIFO 12. In LIFO method of inventory valuation?(a) Issue of stocks to production is at latest price (b) Closing stock is at latest price (c) Both (a) & (b) (d) Neither (a) nor (b) 13. The inventory method that will always produce the same amount for cost of goods sold in a periodic inventory system as in a perpetual inventory system would be?(a) FIFO (b) LIFO (c) Weighted average (d) None of these 14. Inventory does not include?(a) Materials used in the production of goods to be sold (b) Assets intended to be sold in the normal course of business (c) Equipment used in the manufacturing are sold (d) Assets currently in production for normal sales 15. Net Purchases equal the invoice amount and?(a) Plus freight-in, plus discounts (b) Less purchase returns, plus purchase allowances (c) Plus freight-in, less purchase discounts (d) Plus discounts, less purchase returns 16. In FIFO method of inventory valuation?(a) Closing stock is at latest price (b) Issue of stocks to production is at earliest price (c) Both (a) & (b) (d) Neither (a) nor (b) 17. The average inventory costing method which results in a changed unit inventory cost after each successive purchase?(a) Weighted average (b) Moving average (c) Specific cost (d) Simple average 18. The specific cost identification inventory cost flow method has all of the following characteristics except?(a) It identifies the cost of each physical item available for sale with either the ending inventory or cost of goods sold (b) It relates cost flow to the specific flow of physical goods (c) It is especially applicable when small and inexpensive items are handled in large quantities (d) It requires individual identification of items some device like tags or serial numbers 19. Sales revenues are usually considered earned when?(a) Cash is received from credit sales (b) An order is received (c) Goods have been transferred from the seller to the buyer (d) Adjusting entries are made 20. A retail firm would normally use an inventory account titled?(a) Finished Goods Inventory (b) Merchandise Inventory (c) Goods in Process Inventory (d) Raw Materials Inventory Inventory Valuation (11-20)
ReferencesCost Accounting For Dummies – By Kenneth W. Boyd Fundamentals Of Cost Accounting – By William Lanen, Shannon Anderson Et.Al Cost Accounting Fundamentals – By Steven M. Bragg Cost Accounting Made Simple – By Mike Piper Principles Of Cost Accounting – By Maria R. Mitchell Fundamentals Of Cost Accounting 5th Edition – By William Lanen, Shannon Anderson, And Michael Maher Which of the following is false regarding LIFO method?UnderLIFO since the most recently purchased are assumed to be first units sold, theinventory comprises of oldest units and oldest cost. Hence option (e) is false. All otherstatements are true.]
What is LIFO method of inventory valuation?Last in, first out (LIFO) is a method used to account for inventory. Under LIFO, the costs of the most recent products purchased (or produced) are the first to be expensed. LIFO is used only in the United States and governed by the generally accepted accounting principles (GAAP).
Why LIFO method is not used?IFRS prohibits LIFO due to potential distortions it may have on a company's profitability and financial statements. For example, LIFO can understate a company's earnings for the purposes of keeping taxable income low. It can also result in inventory valuations that are outdated and obsolete.
When would you use LIFO inventory method?FIFO (first in, first out) inventory management seeks to value inventory so the business is less likely to lose money when products expire or become obsolete. LIFO (last in, first out) inventory management is better for nonperishable goods and uses current prices to calculate the cost of goods sold.
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Which of the following is false regarding the LIFO method of inventory valuation?
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