Chapter 9: Inventories

According to IAS 2, inventories are assets: (Difficulty: Easy)
1. Held for sale in the ordinary course of business.
2. In the process of production for sale in the ordinary course of business.
3. In the form of materials or supplies to be consumed in the production process or in the rendering of services.
4. All of the above.
Which of the following items can only constitute a work-in-progress inventory? (Difficulty: Easy)
1. Finished goods
2. Merchandise
3. Services
4. Raw materials
In practice, what are the two methods for recording inventory movements? (Difficulty: Easy)
1. Perpetual and periodic inventory systems.
2. Daily and annual inventory systems.
3. Commercial and manufacturing inventory systems.
4. Continuous and discontinuous inventory systems.
Under a perpetual inventory system, a continuous recording of changes in inventory is maintained in the inventory account. How are purchases recorded? (Difficulty: Easy)
1. As decreases of the inventory assets in the balance sheet.
2. As increases of the inventory assets in the balance sheet.
3. As decreases of the provision for depreciation of inventories in the balance sheet.
4. As increases of the provision for depreciation of inventories in the balance sheet.
In an income statement organized by nature, how is the change in inventory on the revenue side computed? (Difficulty: Moderate)
1. Beginning inventory – Ending inventory
2. Ending inventory – Beginning inventory
3. Beginning inventory + Ending inventory
4. (Beginning inventory + Ending inventory)/2
Which procedure is applied when goods withdrawn are valued batch by batch in the reverse order from the one they followed when entering inventory? (Difficulty: Moderate)
1. First-In, First-Out
2. Weighted average cost method
3. First-Out, First-In
4. Last-In, First-Out
In order to use LIFO, FIFO or weighted average costs method, the products must be: (Difficulty: Moderate)
1. Fungible to some degree
2. Small
3. Valuable
4. Available for sale
Given the following data, what is the amount of the ending inventory under weighted average cost method (WAC)? (Difficulty: Moderate)
o No beginning inventory
o 1st purchase: 10 units are purchased and are recorded for an acquisition cost of 10 CU per unit
o 2nd purchase: 10 units are purchased and are recorded for an acquisition cost of 12 CU per unit
o 15 units are sold at the end of the period for a unit selling price of 18 CU per unit
1. 60
2. 50
3. 55
4. 65
The choice of inventory valuation methods has an impact on cash flow before tax. (Difficulty: Moderate)
1. True
2. False
Given the following data, what is the amount of the provision for loss of value of inventory that must be recorded at the end of the accounting period? (Difficulty: Moderate)
o Purchase of 1 000 items X at a unit cost of acquisition of 20 CU
o Wholesale market unit price of the items X dropped to 15 CU
o 100 units of items X in inventory at the end of the accounting period
1. 0
2. 100
3. 500
4. 1000

Chapter 9: Inventories

Quiz