T 3 MAINTAINING FINANCIAL RECORDS INVENTORY

ASAD EJAZ (ACCA, CISA, CIISA)

1.

Inventory is valued using FIFO. Opening inventory was 10 units at $2 each. Purchases were 30 units at $3 each, then issues of 12 units were made, followed by issues of 8 units. What is closing inventory valued at? A. B. C. D. $50 $58 $60 $70

2.

An organizations inventory at 1 July is 145 units @ $3.00 each. The following movements occur: 3 July 20X6 8 July 20X6 12 July 20X6 5 units sold at $3.30 each 10 units bought a t$3.50 each 8 units sold at $4.00 each

Closing inventory at 31 July, using the FIFO method of inventory valuation would be. A. B. C. D. 3. $31.50 $36.00 $39.00 $41.00

Your organization uses the weighted average cost method of valuing inventories. During August 20X1, the following inventory details were recorded. Opening balance 5 August 10 August 18 August 23 August 30 units valued at $2 each purchases of 50 units at $2.40 each issue of 40 units purchase of 60 units at $2.50 each issue of 25 units

The value of the balance at 31 August 20X1 was A. B. C. D. 4. $172.50 $176.25 $180.00 $187.50

During September, your organization 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. B. C. D. $24,000 $26,000 $42,000 $54,000

5.

Your firm values inventory using eh weighted average cost method. At 1 October 20X8, there were 60 units in inventory valued at $12 each. On 8 October, 40 units were purchased for $15 each, and a further 50 units were purchased for $18 each on 14 October. On 21 October, 75 units were sold for $1,200.

T 3 MAINTAINING FINANCIAL RECORDS INVENTORY

ASAD EJAZ (ACCA, CISA, CIISA)

The value of closing inventory at 31 October 20X8 was A. B. C. D. 6. $900 $1,020 $1,110 $1,125

Inventory movements for product X during the last quarter were as follows January February March Purchases Sales Purchases Sales 10 items at $19.80 each 10 items at $30 each 20 items at $24.50 each 5 items at $30 each

Opening inventory at 1 January was 6 items valued at $15 each Gross profit for the quarter, using the weighted average cost method, would be A. B. C. D. $135.75 $155.00 $174.00 $483.00

7.

A firm has the following transactions with its product R Year 1 Opening inventory: Nil Buys 10 units at $300 per unit Buys 12 units at $250 per unit Sells 8 units at $400 per unit Buys 6 units at $200 per unit Sells 12 units at $400 per unit Year 2 Buys 10 units at $200 per unit Sells 5 units at $400 per unit Buys 12 units at $150 per unit Sells 25 units at $400 per unit (a) Using LIFO: At the end of the year 1, calculate closing inventory $ At the end of year 2, calculate cost of sales. $ (b) Using FIFO At the end of the year 1, calculate closing inventory. $ At the end of the year 2, calculate cost of sales. $

8.

Inventory is valued using FIFO. Opening inventory was 10 units at $2 each. Purchases were 30 units at $3 each, then issues of 12 units were made, followed by issues of 8 units. Closing inventory is valued at

9.

Your organization uses the weighted average cost method of valuing inventories. Opening balance 5 August 30 units valued at $2 each purchase of 50 units at $2.40 each

T 3 MAINTAINING FINANCIAL RECORDS INVENTORY

ASAD EJAZ (ACCA, CISA, CIISA)

10 August 18 August 23 August

issue of 40 units purchase of 60 units at $2.50 each issue of 25 units

The value of the balance at 31 August 20X1 was: A. B. C. D. 10. $172.50 $176.25 $180.00 $187.50

During September, your organization 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

11.

What adjustment would be made to closing inventory if it was discovered that goods with a cost of $5,000 and a net realizable value of $3,000 had been omitted form the year end inventory count? A. B. C. D. An increase of $5,000 An increase of $3,000 An increase of $2,000 A decrease of $2,000

12.

At 30 June 20X2 Dilips inventory was valued at its cost of $45,400. This includes items costing $2,600 which have been superseded by an update design. Dilip will be able to sell these items through an agent for $1,400. The agents commission will be 10% of selling price The value of closing inventory at 30 June 20X2 is

13.

Lavinia valued her inventory at 31 December 20X2 at its cost of $11,480. This includes some items which cost $975 which have been hard to sell. Lavinia intends to have these items repacked at a cost of $225. This will allow her to sell them for $450. The value of closing inventory at 31 December 20X2 is

14.

A retail business has the following two items of inventory at its year end. Item X Y Cost $ 1,600 1,400 Net realizable value $ 1,660 1,250

Applying the prudence concept, what should be the valuation of this inventory in the balance sheet of the business?

T 3 MAINTAINING FINANCIAL RECORDS INVENTORY

ASAD EJAZ (ACCA, CISA, CIISA)

15.

The closing inventory of X amounted to $116,400 excluding the following two inventory lines: 1. 2. 400 items which had cost $4 each. All were sold after the balance sheet date for $3 each, with selling expenses of $200 for the batch. 200 different items which had cost $30 each. These items were found to be defective at the balance sheet date. Rectification work after the balance sheet date amounted to $1,200, after which they were sold for $35 each, with selling expenses totaling $300.

Which of the following total figures should appear in the balance sheet of X for inventory? A. B. C. D. 16. $122,300 $121,900 $122,900 $123,300

SH sells three products Basic, Super and Luxury. The following information was available at the year end: Basic $ per unit 6 9 1 Units 200 Super $ per unit 9 12 4 Units 250 Luxury $ per unit 18 15 5 Units 150

Original cost Estimated selling price Selling and distribution cost

Inventory: units held

The value of inventory at the year-end should be: A. B. C. D. 17. $4,200 $4,700 $5,700 $6,150

An inventory record card for item 1234 shows the following details. February 1 50 units in opening inventory at a cost of $40 per unit 7 100 units purchased at a cost of $45 per unit 14 80units sold 21 50 units purchased at a cost of $50 per unit 28 60 units sold What is the value of inventory at 28 February using the FIFO method?

$
18. A company values its inventory using the first in, first out (FIFO) method. At 1 May 20X2 the company held 700 engines in inventory, valued at $190 each. During the year ended 30 April 20X3 the following transactions took plac: 20X2 1 July 1 November

Purchased Sold

500 engines 400 engines

at $220 each for $160,000

T 3 MAINTAINING FINANCIAL RECORDS INVENTORY

ASAD EJAZ (ACCA, CISA, CIISA)

20X3 1 February 15 April

Purchased Sold

300 engines 250 engines

at $230 3each for $125,000

What is the value of the companys closing inventory of engines at 30 April 20X3? A. B. C. D. 19. $188,500 $195,500 $166,000 None of these figures.

Your organization uses the Weighted Average Cost method of valuing inventories. During august 20X7, the following inventory details were recorded: Opening balance 5 August 10 August 18 August 23 August 30 units valued at $2 each purchase of 50 units at $2.40 each issue of 40 units purchase of 60 units at $2.50 each issue of 25 units

The value of the balance eat 31 August 20X7 was: A. B. C. D. 20. $172.50 $176.25 $180.00 $187.50

At 30 September 20X3 the closing inventory of a company amounted to $386,400. The following items were included in this total at cost: 1. 1,000 items which had cost $18 each. These items were all sold in October 20X3 for $15 each, with selling expenses of $800. 2. Five items which had been in inventory since 1973, when they were purchased for $100 each, sold in October 20X3 for $1,000 each, net of selling expenses. What figure should appear in the companys balance sheet at 30 September 20X3 for inventory? A. B. C. D. $382,600 $384,200 $387,100 $400,600

21.

LMN plc has just published its financial statements, which show a gross profit for the year of $6.5 million. A major error in the inventory valuation has just been discovered. The opening inventory is overstated by $1.3 million, and the closing inventory has been understated by $1.6 million. What should be LMN plcs correct gross profit for the year? A. B. C. D. $3.5m $6.2m $6.8m $9.4m

T 3 MAINTAINING FINANCIAL RECORDS INVENTORY

ASAD EJAZ (ACCA, CISA, CIISA)

22.

NRV plc has the following items in its inventory as at its year end: Cost $ Item A Item B 1,000 800 1,800 Net realizable value $ 1,200 500 1,700

How should NRV plcs closing inventory be valued in the balance sheet?

23.

What is the unit cost of the following item? $ Raw materials Labour Manufacturing overheads Variable administrative overheads A. B. C. D. $5.00 $8.00 $9.00 $11.50 5.00 3.00 1.00 2.50

24.

What is the net realizable value of the following item? $ 20.00 2.00 3.00 2.50

Selling price Packaging costs Delivery costs License fee paid after delivery

25.

A company includes in the valuation of its closing inventory some goods that were received before the year end, but for which invoices were not received until after the year end. This is in accordance with: A. B. C. D. The historical cost convention The accruals concept The consistency concept The materiality concept.

26.

Percy Pilbeam is a book wholesaler. On each sale, commission of 4% is payable ot the sales agent. The following information is available in respect of total inventories of three of his most popular titles at his financial year-end: Cost $ 2,280 4,080 Selling Price $ 2,900 4,000

Henry VII Shakespeare Dissuasion Jane Armstrong Siddeley

T 3 MAINTAINING FINANCIAL RECORDS INVENTORY

ASAD EJAZ (ACCA, CISA, CIISA)

Pilgrims Painful Progress John Bunion

1,280

1,300

What is the total value of these inventories in Percys balance seet?

27.

Suresh & Co sell three products Basic, Super and Luxury. The following information was available at the year end: Basic $ per unit Original cost Estimated selling price Selling and distribution costs 6 9 1 9 12 4 Super $ per unit Luxury $ per unit 18 15 5 Units 150

Units Units Units held 200 250 The value of the inventory at the year end should be: A. B. C. D. 28. $4,200 $4,700 $5,700 $6,150

Ariene valued her inventory at 30 June 20X1 at its cost of $22,960. This includes some items which cost $1,950 which have been hard to sell. Ariene intends to have these items repacked at a cost of $400. She can then sell them for $900. What will be the value of closing inventory in Arlenes accounts at 30 June 20X1? A. B. C. D. $22,960 $21,910 $21,510 $21,010

29.

At 30 November 20X1 Kims inventory was valued at its cost of $22,700. This includes items costing $1,300 which have been supersede by an updated design. Kim will be able to sell these items through an agent for $700. The agents commission will be 10% of selling price. What is the value of closing inventory on 30 November 20X1?

30.

Justin Ltds stock valuation also excludes a number of free samples from potential suppliers. They would normally cost 300 and could probably be sold to Justin Ltds customers for 550. The effect on the companys profit of excluding this stock is that: A. B. C. D. Profit is understated by 250 Profit is understated by 300 Profit is understated by 550 Profit is stated correctly

T 3 MAINTAINING FINANCIAL RECORDS INVENTORY

ASAD EJAZ (ACCA, CISA, CIISA)

31.

Jemimas stock valuation includes certain damaged goods at their original cost of 2,655. These could be repaired at a cost of 420 and sold for 2,900. The effect on Jemimas profit of including theses goods at cost is that: A. B. C. D. Profit is overstated by 175 Profit is overstated by 2,655 Profit is understated by 2,480 Profit is stated correctly

32.

John Ltds stock valuation includes goods received from Jeremy Ltd on a sale or return basis. The goods have been invoiced by Jeremy Ltd at 12,000 and John Ltd would expect to sell them to customers for 16,000. John Ltd has not recorded the purchase invoice in its books. The effect on John Ltds profit of including these goods in the stock valuation at their cost of 12,000 is that: A. B. C. D. Profit is overstated by 12,000 Profit is understated by 4,000 Profit is understated by 12,000 Profit is stated correctly

33.

Jingle purchases goods with a list price of 8,000. the supplier grants a trade discount of 5% on list price, and Jingle also takes advantage of a settlement discount amounting to 2% of list price. In Jingles balance sheet the value of this stock should be: A. B. C. D. 7,200 7,600 7,840 8,000

34.

Junket Ltds year end is 31 December. For various reasons, stock could not be counted this year until 6 January. The stock valuation at this date was 74,300. Detailed records were kept of stock movements between the year end and the stocktake. The following figures (all stated at cost) are available: 1,250 1,155 275 140

Sales Purchases Returns inwards Returns outwards

The value of stock in Junket Ltds balance sheet at 31 December is: A. B. C. D. 35. 74,070 74,260 74,340 74,530

Jamborees draft balance sheet includes a stock figure of 25,850. On further investigation, the following facts are discovered:

T 3 MAINTAINING FINANCIAL RECORDS INVENTORY

ASAD EJAZ (ACCA, CISA, CIISA)

1) One stock sheet had been over-added by 212 and another under-added by 74. 2) Goods included at their cost of 460 had deteriorated. They could still be sold at their normal selling price (800) once repair work costing 270 was complete 3) Goods costing 430 sent to customers on a sale to return basis had been included in stock at their selling price of 66. The corrected figure for stock in Jamborees balance sheet is: A. B. C. D. 36. 25,047 25,477 25,547 25,753

The stock of Jordan Ltd includes the following three items Suppliers list price 240 281 172 693 Net realizable value 272 385 157 814

Product A Product B Product C

At what total value should these items be stated in the balance sheet of Jordan Ltd? A. B. C. D. 37. 678 693 814 829

Jordan Ltds stock also includes three items for which the following details are available Suppliers list price 3,600 2,900 4,200 10,700 Net realizable value 5,100 2,800 4,100 12,000

Product D Product E Product F

The company receives a 2 % trade discount from its suppliers, and also takes advantage of a 2% discount for prompt payment. At what total value should products D, E and F be stated in the balance sheet of Jordan Ldt? A. B. C. D. 10,219 10,405 10,428 10,433

T 3 MAINTAINING FINANCIAL RECORDS INVENTORY

ASAD EJAZ (ACCA, CISA, CIISA)

38.

Jehus accounts showed a gross pofit for the year of 27,200. After the accounts were prepared it was found that the opening stock had been overstated by 1,200 while closing stock had been understated by 1,700. What is the amount of Jehus corrected gross profit for the year? A. B. C. D. 24,300 26,700 27,700 30,100

39.

The following details are taken from the books of Jumbo Ltd: 2,850 4,270 3,110 37,640 2,770 1,840

Opening stock Closing stock Carriage outwards

Purchases Returns inwards Carriage inwards

What is the companys cost of goods sold? A. B. C. D. 40. 35,290 38,060 39,480 41,170

Jenkins Ltd has 200 identical units of stock. Each one cost 60 originally and they would be ready for sale after modification work costing 12 per unit. Their selling price would then be 100 each, but the company would incur selling costs of 8% of sales value. Calculate the total balance sheet value of this stock. A. B. C. D. 12,000 14,400 16,000 18,400

41.

James Ltd purchased raw materials for 4,720 and paid 125 transporting the materials to its own premises. Conversion costs incurred amounted to 2,115 by 31 December 19X8. At the date, cost of 845 were still required to get the goods into a saleable condition. The estimated eventual selling price is 8,200; selling and distribution costs will amount to 4% of selling price. At what value should this work in progress be stated in the balance sheet of James Ltd at 31 December 19X8? A. B. C. D. 4,845 6,960 7,027 7,872

T 3 MAINTAINING FINANCIAL RECORDS INVENTORY

ASAD EJAZ (ACCA, CISA, CIISA)

Data for question 16 18 John makes purchases as follows in his first period of trading: Price Units per unit 3 January 19X8 18 February 19X8 11 March 19X8 20 April 19X8 12 May 19X8 20 June 19X8 15 35 28 45 10 8 26 28 23 32 33 35

On 27 June John sells 100 units for 40 each. 42. In his balance sheet at 30 June 19X8 what is the value of Johns stock, assuming he uses the FIFO basis? A. B. C. D. 43. 1,118 1,182 1,346 1,640

In his balance sheet at 30 June 19X8 what is the value of Johns stock, assuming he uses the LIFO basis? A. B. C. D. 1,118 1,182 1,346 1,640

44.

In his balance sheet at 30 June 19X8 what is the value of Johns stock assuming he uses the average cost basis? A. B. C. D. 1,118 1,182 1,346 1,640

Data for question 19 21 Jones, a sole trader, had 3,000 components in stock at 1 January with a value of 1.74 each. During January and February the following stock movements occurred.

Date

Receipts Quantity 20,000 24,000 26,000

Unit price 1.68

Issues Quantity

Unit price

5 January 15 January 20 January 8 February 10 February 12 February 25 February 27 February

16,000 1.72 1.75 24,000 4,000 20,000 1.78 40,000

1.68

1.75 1.735 1.75

T 3 MAINTAINING FINANCIAL RECORDS INVENTORY

ASAD EJAZ (ACCA, CISA, CIISA)

45.

What method is Jones using to charge issues to production? A. B. C. D. LIFO FIFO Replacement cost Average cost

46.

How many components remain in stock at the end of February? A. B. C. D. 69,000 49,000 9,000 6,000

47.

What value will Jones place on his stock at the end of February? A. B. C. D. 10,160 15,300 15,380 15,600

48.

Goods sent to a customer on a sale or return basis are to be included in stock at the year end. The following details are available: 1,000 500 150 200 2,000

Cost of purchase Cost of conversion Carriage outwards Selling costs Selling price

At what value should the stocks be recorded in the balance sheet? A. B. C. D. 49. 1,500 1,650 1,800 1,850

On which, recommended, basis should stocks be valued? A. B. C. D. Cost Higher of cost or net realizable value Lower of cost or net realizable value Net realizable value.

50.

A firm values its stock at cost. At the end of the year stock includes goods which had cast $750 but which because of damage, will be sold for $250. What happens when this is corrected? Gross profit A. Increase by $250 B. Increase by $500 C. Decrease by $500 Net profit increase by $250 increase by $500` decrease by $500 Current assets decrease by $250 decrease b$500 decrease b$500

T 3 MAINTAINING FINANCIAL RECORDS INVENTORY

ASAD EJAZ (ACCA, CISA, CIISA)

D. Decrease by $750 51.

decrease by $750

decrease b$750

As per prudence concept, stock should be included in the balance sheet at. A. B. C. D. Its cost Its net realizable value. The lower of its total cost and its total net realizable value The lower of its cost and its net realizable value on an item- by- item or category by- category basis.

52.

A trade deals in three items only. At the end of the year their cost and net ralisable value (NRV ) of each are as follows Cost NRV Item 1 $15,000 $12,000 Item 2 27,000 25,000 Item 3 15,000 10,000 Which figure is to be included in the firms balance sheet in respect of stock, is A. B. C. D. $44,000 $47,000 $57,000 $60,000

53.

If an item of stock which originally cost $1,400 can be sold for $1,700 after incurring further completion costs of $230 and advertising costs of $110, them it should be included in the balance sheet stock valuation at. A. B. C. D. $1,360 $1,420 $1,490 $1,600

54.

When stocks are valued at lower of Cost or NRV, it obeys the concept of A. B. C. D. Consistency concept. Going concern concept Prudence concept Accruals concept.

55.

FIFO means A. B. C. D. Fixed income Financial Operations Final interest Free Option The first-in- First Out method of approximating the cost of stock None of the above

56.

LIFO means A. B. C. D. Large integrated Financial Organisation Least interesting Financial Option The Last-In-First-Out method of approximating the cost of stock None of the above

T 3 MAINTAINING FINANCIAL RECORDS INVENTORY

ASAD EJAZ (ACCA, CISA, CIISA)

57.

If stock valuation method is changed every year by the firm, which concept the firm has violated A. B. C. D. The materiality concept The consistency concept The prudence concept The going concern concept.

58.

In times of rising prices, the FIFO method of inventory valuation, when compared to the average cost method of inventory valuation, will usually produce A. B. C. D. A higher profit and a lower closing inventory value A higher profit and a higher closing inventory value A lower profit and a lower closing inventory value A lower profit and a higher closing inventory value

59.

Following the preparation of the income statement, it is discovered that accrued expenses of $1,000 have been ignored and that closing inventory has been overvalued by $1,300. This will have resulted in A. B. C. D. An overstatement of net profit of $300 An understatement of net profit of $300 An overstatement of net profit of $2,300 An understatement of net profit of $2,300

60.

In times of rising prices, the valuation of inventory using the FIFO method, as opposed to average cost, will result in which ONE of the following combinations? Cost of sales A. B. C. D. Lower Lower Higher Higher Profit Higher Higher Lower Higher Closing inventories Higher Lower Higher Lower