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You correctly answered 23 out of 30 questions with an accuracy of 76.67%. You gained 460 experience points!

Question 1

An entity is a large manufacturer of machines. A major customer has placed an order for a special machine for which it has given a deposit to the entity. The parties have agreed on a price for the machine. As per the terms of the sale agreement, it is FOB or free on board contract and the title passes to the buyer when goods are loaded into the ship at the port. When should the revenue be recognized by the entity?

When the machine is loaded at the port

You correctly answered 23 out of 30 questions with an accuracy of 76.67%. You gained 460

When the machine has been received by

the customer

When the costumer orders the machine

When the deposit is

You correctly answered 23 out of 30 questions with an accuracy of 76.67%. You gained 460

received

Theory of Accounts - Inventory Valuation (Average)

Question 2

Which of the following inventories carried by a manufacturer is similar to the merchandise inventory of a retailer?

Raw materials

Finished goods

Supplies

Work-in-process

You correctly answered 23 out of 30 questions with an accuracy of 76.67%. You gained 460

Theory of Accounts - Inventory Valuation (Average)

Question 3

Under PAS 2, commodities of broker-traders are measured at

Fair value Cost
Fair value
Cost

Net realizable value

You correctly answered 23 out of 30 questions with an accuracy of 76.67%. You gained 460

Fair value less cost to sell

Theory of Accounts - Inventory Valuation (Average)

Question 4

If the beginning inventory for 2016 is overstated, the effects of this error on cost of goods sold for 2016, net income for 2016, and assets at December 31, 2015, respectively, are

understatement, overstatement, no effect

overstatement, understatement,

If the beginning inventory for 2016 is overstated, the effects of this error on cost of

overstatement

overstatement, understatement, no effect

understatement,

If the beginning inventory for 2016 is overstated, the effects of this error on cost of

overstatement, overstatement

Theory of Accounts - Inventory Valuation (Average)

Question 5

Goods on consignment shall be included in the inventory of

The consignor but not the consignee

Both the consignor and the consignee

If the beginning inventory for 2016 is overstated, the effects of this error on cost of

The consignee but not the consignor

If the beginning inventory for 2016 is overstated, the effects of this error on cost of

Neither the consignor nor the consignee

Theory of Accounts - Inventory Valuation (Average)

Question 6

For a merchandising company, inventory shall exclude

Transportation and handling costs

Import duties and other taxes

Purchase

If the beginning inventory for 2016 is overstated, the effects of this error on cost of

price

If the beginning inventory for 2016 is overstated, the effects of this error on cost of

Trade discounts and rebates

Theory of Accounts - Inventory Valuation (Average)

Question 7

An entity should include one of the following items in its merchandise inventory.

Good purchased FOB shipping point still en route

Goods purchased FOB

If the beginning inventory for 2016 is overstated, the effects of this error on cost of

destination still en route

Goods sold FOB shipping point still en route

Goods held

If the beginning inventory for 2016 is overstated, the effects of this error on cost of

for pick up by the buyer

Theory of Accounts - Inventory Valuation (Average)

Question 8

The use of a Discounts Lost account implies that the recorded cost of a purchased inventory item is its

invoice price less the purchase discount taken

invoice price less the purchase

Question 8 The use of a Discounts Lost account implies that the recorded cost of a

discount allowable whether taken or not

invoice price

Question 8 The use of a Discounts Lost account implies that the recorded cost of a
Question 8 The use of a Discounts Lost account implies that the recorded cost of a

invoice price plus the purchase discount lost

Theory of Accounts - Inventory Valuation (Average)

Question 9

RS Corporation, a manufacturer of ethnic foods, contracted in 2016 to purchase 500 pounds of a spice mixture at P5.00 per pound, delivery to be made in spring of 2015. By 12/31/10, the price per pound of the spice mixture had risen to P5.60 per pound. In 2016, AJ should recognize

a gain of P300

no gain or loss

a loss of P2,500

a loss of P300

Question 8 The use of a Discounts Lost account implies that the recorded cost of a

Theory of Accounts - Inventory Valuation (Average)

Question 10

The accountant for the Cooperative Sales Company is preparing the income statement

for 2016 and the balance sheet at December 31, 2016. Cooperative uses the periodic inventory system. The January 1, 2016 merchandise inventory balance will appear

only in the cost of goods sold section of the income statement.

as an addition in

Question 8 The use of a Discounts Lost account implies that the recorded cost of a

the cost of goods sold section of the income statement and as a current asset on the

balance sheet.

Question 8 The use of a Discounts Lost account implies that the recorded cost of a

as a deduction in the cost of goods sold section of the income

statement and as a current asset on the balance sheet.

Question 8 The use of a Discounts Lost account implies that the recorded cost of a

only as an asset on the

balance sheet

Theory of Accounts - Inventory Valuation (Average)

Question 11

An entity shall include in its inventory all goods Possessed but not owned by the entity at the balance sheet date

Owned but not

Question 11 An entity shall include in its inventory all goods Possessed but not owned by

possessed by the entity at the balance sheet date

Question 11 An entity shall include in its inventory all goods Possessed but not owned by

Owned and possessed by the

entity at the balance sheet date

Question 11 An entity shall include in its inventory all goods Possessed but not owned by

Owned by the entity at the balance sheet date,

regardless of location

Theory of Accounts - Inventory Valuation (Average)

Question 12

FOB destination means that The freight charges are actually to be paid by the buyer

The freight charges are

Question 11 An entity shall include in its inventory all goods Possessed but not owned by

actually to be paid by the seller.

Question 11 An entity shall include in its inventory all goods Possessed but not owned by

The ownership of goods is transferred upon receipt

of the goods by the buyer and the seller is the owner of the goods while in transit

Question 11 An entity shall include in its inventory all goods Possessed but not owned by

The

ownership of goods is transferred upon shipment of the goods by the seller and the buyer is the owner of the goods while in transit

Theory of Accounts - Inventory Valuation (Average)

Question 13

Which of the following would not be included in the cost of work in process inventory?

Maintenance cost of factory equipment

Depreciation on factory equipment

Question 11 An entity shall include in its inventory all goods Possessed but not owned by

Cost of electricity to operate factory equipment

Question 11 An entity shall include in its inventory all goods Possessed but not owned by

Depreciation on office equipment in

the sales manager’s office

Theory of Accounts - Inventory Valuation (Average)

Question 14

Which of the following terms represents the deduction from the invoice price of purchased goods granted by suppliers for early payment?

Trade discount

Purchase discount

Purchase return and allowance

Sales

Which of the following terms represents the deduction from the invoice price of purchased goods granted

discount

Theory of Accounts - Inventory Valuation (Average)

Question 15

Which of the following would not be included in the cost of work in process inventory?

Cost of electricity to operate factory equipment

Depreciation on factory

Which of the following terms represents the deduction from the invoice price of purchased goods granted

equipment

Depreciation on office equipment in the sales manager’s office

Which of the following terms represents the deduction from the invoice price of purchased goods granted

Maintenance cost of factory equipment

Theory of Accounts - Inventory Valuation (Average)

Question 16

In no case can "market" in the lower-of-cost-or-market rule be more than

estimated selling price in the ordinary course of business

estimated selling price

Which of the following terms represents the deduction from the invoice price of purchased goods granted

in the ordinary course of business less reasonably predictable costs of completion and disposal, an allowance for an approximately normal profit margin, and an adequate

reserve for possible future losses

Which of the following terms represents the deduction from the invoice price of purchased goods granted

estimated selling price in the ordinary course of

business less reasonably predictable costs of completion and disposal

Which of the following terms represents the deduction from the invoice price of purchased goods granted

estimated

selling price in the ordinary course of business less reasonably predictable costs of completion and disposal and an allowance for an approximately normal profit margin

Theory of Accounts - Inventory Valuation (Average)

Question 17

What is the maximum amount at which inventory can be valued when the goods have experience a permanent decline in value?

Net realizable value reduced by a normal profit margin

Net realizable value

Net realizable value reduced by a normal profit margin Net realizable value Sales price Historical cost

Sales price

Net realizable value reduced by a normal profit margin Net realizable value Sales price Historical cost

Historical cost

Theory of Accounts - Inventory Valuation (Average)

Question 18

Why are inventories stated at lower-of-cost-or-market?

To be conservative

To report a loss when there is a decrease in the future utility

below the original cost To permit future profits to be recognized To report a loss
below the original cost To permit future profits to be recognized To report a loss

below the original cost

To permit future profits to be recognized

To report a loss

 
below the original cost To permit future profits to be recognized To report a loss
below the original cost To permit future profits to be recognized To report a loss

when there is a decrease in the future utility

Theory of Accounts - Inventory Valuation (Average)

Question 19

If goods shipped FOB destination are in transit at the end of the year, they should be included in the inventory balance of the

Common carrier

Bank

Buyer

Seller

Net realizable value reduced by a normal profit margin Net realizable value Sales price Historical cost

Theory of Accounts - Inventory Valuation (Average)

Question 20

Which of the following describes the flow of product costs through the inventory accounts of a manufacturer?

Raw materials, direct labor, factory overhead

Raw materials, goods in process,

finished goods Raw materials, goods in process, factory overhead, finished goods Raw materials, direct labor, factory
finished goods Raw materials, goods in process, factory overhead, finished goods Raw materials, direct labor, factory

finished goods

Raw materials, goods in process, factory overhead, finished goods

 
finished goods Raw materials, goods in process, factory overhead, finished goods Raw materials, direct labor, factory

Raw materials, direct labor, factory overhead, finished goods

finished goods Raw materials, goods in process, factory overhead, finished goods Raw materials, direct labor, factory

Theory of Accounts - Inventory Valuation (Average)

Question 21

How should prompt payment discount be dealt with when valuing inventories at the lower of cost and net realizable value?

Ignored

Deducted from cost

Added to cost

Deducted in arriving at NRV

How should prompt payment discount be dealt with when valuing inventories at the lower of cost

Theory of Accounts - Inventory Valuation (Average)

Question 22

An entity returned merchandise purchased on account. Under a perpetual inventory

system, the account credited in the journal entry to record the return is

Purchase returns and allowances

Purchases

Accounts payable

Inventory

How should prompt payment discount be dealt with when valuing inventories at the lower of cost

Theory of Accounts - Inventory Valuation (Average)

Question 23

How should trade discounts be dealt with valuing inventories at the lower of cost and net realizable value (NRV)?

Added to cost

Deducted from cost

Ignored

Deducted in arriving at NRV

How should prompt payment discount be dealt with when valuing inventories at the lower of cost

Theory of Accounts - Inventory Valuation (Average)

Question 24

Which method(s) may be used to record a loss due to a price decline in the value of inventory?

Direct method

Allowance method

Both a and c

Sales method

How should prompt payment discount be dealt with when valuing inventories at the lower of cost

Theory of Accounts - Inventory Valuation (Average)

Question 25

When a portion of inventory has been pledged as security on a loan The cost of the pledged inventory should be transferred from current assets to

How should prompt payment discount be dealt with when valuing inventories at the lower of cost

noncurrent assets.

How should prompt payment discount be dealt with when valuing inventories at the lower of cost

The value of the portion pledged should be subtracted from the

debt

An equal amount of retained earnings should be appropriated

The fact

debt An equal amount of retained earnings should be appropriated The fact should be disclosed but

should be disclosed but the amount of current assets should not be affected

Theory of Accounts - Inventory Valuation (Average)

Question 26

An entity’s inventory cost in its statement of financial position was lower using first-in, first-out than last-in, first-out. Assuming no beginning inventory, what direction did the cost of purchases move during the period?

Cannot be determined

Up

Down

Steady

debt An equal amount of retained earnings should be appropriated The fact should be disclosed but

Theory of Accounts - Inventory Valuation (Average)

Question 27

Inventories encompass all of the following, except

Finished goods produced

Merchandise purchased by a retailer

Land and

debt An equal amount of retained earnings should be appropriated The fact should be disclosed but

other property not held for sale

debt An equal amount of retained earnings should be appropriated The fact should be disclosed but

Materials and supplies awaiting use in the production

process

Theory of Accounts - Inventory Valuation (Average)

Question 28

Dennis Co. received merchandise on consignment. As of January 31, Dennis included the goods in inventory, but did not record the transaction. The effect of this on its financial statements for January 31 would be

net income was correct and current assets were understated

net income, current

debt An equal amount of retained earnings should be appropriated The fact should be disclosed but

assets, and retained earnings were overstated

debt An equal amount of retained earnings should be appropriated The fact should be disclosed but

net income and current assets were

overstated and current liabilities were understated

debt An equal amount of retained earnings should be appropriated The fact should be disclosed but

net income, current assets, and

retained earnings were understated

Theory of Accounts - Inventory Valuation (Average)

Question 29

Which of the following is not a basic assumption of the gross profit method?

 

Goods not sold must be on hand

The beginning inventory plus the purchases

Goods not sold must be on hand The beginning inventory plus the purchases equal total goods
Goods not sold must be on hand The beginning inventory plus the purchases equal total goods

equal total goods to be accounted for

 

The total amount of purchases and the total

Goods not sold must be on hand The beginning inventory plus the purchases equal total goods

amount of sales remain relatively unchanged from the comparable previous period

Question 29 Which of the following is not a basic assumption of the gross profit method?

If

the sales, reduced to the cost basis, are deducted from the sum of the opening inventory plus purchases, the result is the amount of inventory on hand

Theory of Accounts - Inventory Valuation (Average)

Question 30

How should sales staff commission be dealt with when valuing inventories at the lower cost and net realizable value (NRV)?

Ignored

Deducted from cost

Added to cost

Deducted in arriving at NRV

Question 29 Which of the following is not a basic assumption of the gross profit method?

Theory of Accounts - Inventory Valuation (Average)