1. Which of the following should be excluded in an entity’s inventories?

a. Merchandise displayed in the sales department

b. Goods contained in the warehouse
c. Goods-in-transit purchased under FOB destination
d. Goods-in-transit purchased under FOB shipping point

2. Which of the following is included in an entity’s inventories?

a. Damaged and worthless merchandise
b. Goods sold under a sale with repurchase obligation
c. Goods-in-transit sold under FOB shipping point
d. Goods purchased under a “lay-away” sale

3. Which of the following is an objective of inventory accounting according to PAS 2 Inventories?

a. The proper recognition of cost of inventory recognized as expense when the related revenue is recognized
b. The proper representation of cost of inventories recognized as assets in the financial statements
c. A and B
d. None of these

4. Under this inventory system, a physical count is necessary before profit is determined.
a. Perpetual
b. Periodical
c. Periodic
d. Under no such system

5. Under this inventory system, a physical count is necessary only for internal control purposes
a. FIFO
b. Periodic
c. Perpetual
d. Under no such system

6. Inventories are measured at

a. cost
b. net realizable value
c. lower of a and b
d. replacement cost

7. when applying the lower of cost and net realizable value (NRV), inventories are
a. usually not written down below fair value
b. usually written down to net realizable value on a per classification basis (e.g., as finished goods, work-in-process, and
raw materials)
c. usually written down to net realizable value on an item by item basis
d. all of these

8. Reversals of inventory write-downs

a. Are not prohibited under the PFRSs
b. Are always recognized in profit or loss
c. Should not exceed the amount of write-downs previously recognized
d. All of these

9. Which of the following is equal to the cost of goods sold?

a. Net purchases plus the excess of ending inventory over beginning inventory
b. Total goods available for sale plus ending inventory
c. Net purchases minus the increase in inventory
d. Net purchases minus the decrease in inventory

10. Cost of goods sold is equal to

a. Total goods available for sale plus ending inventory
b. Sum of ending inventory and cost of inventory charged to expense minus net purchases
c. Total goods available for sale minus ending inventory
d. Net purchases minus ending inventory

11. When using perpetual inventory system,

a. No purchases account is used.
b. Two entries are required to record sale.
c. A and B
 d. None of these

12. Which of the following is correct?

a. Selling costs are product costs.
b. Internet cost for routine inventories are product cost.
c. Manufacturing overhead costs are product costs.
d. All of these

13. Which of the following is not included as part of the cost of an inventory?
a. Purchase cost, net of trade discount
b. Direct labor cost
c. Selling cost
d. Freight in

14. Conversion costs do not include which of the following costs?

a. Production overhead
b. Direct labor
c. Direct materials
d. All of these are included

15. These deal with the computation of cost of sales and cost of ending inventory?
a. Net realizable value
b. Perpetual inventory system
c. Cost formulas
d. Costing

16. In which of the following instances is a write-down of inventories to net realizable value not required?
a. The inventories are damaged.
b. The inventories have become wholly or partially obsolete.
c. The selling prices are rising because demand has increased.
d. The estimated costs to complete or costs to sell have increased.

17. Write-downs of inventories to their net realizable value are recognized

a. Directly in equity
b. In other comprehensive income
c. In profit or loss
d. Any of these

18. Which of the following statements is incorrect regarding the use of cost formulas?
a. PAS 2 requires the use of specific identification of costs for inventories that are not ordinarily interchangeable.
b. Entities may choose between the FIFO and the Weighted Average cost formulas.
c. Different cost formulas may be used for each class of inventory with dissimilar nature and use.
d. Only one formula shall be used for all inventories regardless of differences in their nature and use.

19. Entity A’s inventories consist of items that are ordinarily interchangeable. According to PAS 2, which of the following cost
formulas shall Entity A use?
a. FIFO
b. Weighted average
c. A and B
d. Specific identification

20. Entity A buys and sells two types of products – Product A and Product B. Items of Product A are not ordinarily
interchangeable while items of Product B are ordinarily interchangeable. According to PAS 2, what cost formula shall Entity
A use?
Product A Product B
a. SI SI
b. FIFO WA
c. SI FIFO or WA
d. SI, FIFO or WA SI, FIFO or WA

Daks or Juts. Jisulat mo ang Daks kung betsung mong truelaloo ang statementsky at Juts kung wrongness. Charot!

1. In a period of rising prices, the use of FIFO relates the current high costs of acquiring goods with rising sales prices. As a
result, FIFO tends to have a destabilizing effect on gross profit margins.
2. The specific identification method is a highly objective approach to matching historical costs with revenues.
3. Specific identification as an inventory method matches the flow of recorded costs to the physical flow of goods.
4. With FIFO, inventories are reported on the balance sheet at or near their current value.
5. Unlike other inventory cost methods, the average cost approach provides the same unit cost for items of equal utility.
6. FIFO provides income tax savings during periods of falling prices.
7. Inventories are measured at net realizable value (NRV)
8. Inventory write-downs and reversals of write-downs are always recognized in profit or loss.
9. Import duties, freight-in and non-refundable purchase taxes form part of the cost of inventories.
10. According to PAS 2, net realizable value and fair value less costs to sell are the same.