Week 2 Theory of Accounts Part 2 – INVENTORY QUIZ

The cost of purchase of inventory does not include

Select one:
a. Freight and handling costs
b. Purchase price
c. Trade discounts, rebates and other similar items
d. Import duties and irrecoverable taxes

Consumable stores or supplies to be consumed in the production process are reported as

Select one:
a. Inventories
b. Intangible assets
c. Property, plant and equipment
d. Investment property

Entities must allocate the cost of all goods available for sales between

Select one:
a. The income statement and the statement of financial position
b. The cost of goods on hand at the end of the period and the cost of goods acquired during the
period.
c. The cost of goods on hand at the beginning and the cost of goods acquired during the period.
d. All of the choices are correct.

Which of the following costs should be included in inventory valuation?

Select one:
a. Abnormal material usage
b. Administrative cost
c. Storage cost relating to finished goods
d. Fixed production overhead

The cost of conversion of inventories include all, except

Select one:
a. Systematic allocation of fixed production overhead
b. Systematic allocation of variable production overhead
c. Cost directly related to the units of production, such as direct labor
d. Systematic allocation of administrative overhead

When a purchase is made, the purchase is recorded as credit to accounts payable

Select one:
a. As if the discount is to be taken, if using the gross method.
 b. Without regard for the discount, if using the net method.
c. As if the discount is to be taken, if using the net method.
d. As if the discount is to be taken, using either the gross or net method.

How is significant amount of consignment inventory reported?

Select one:
a. Reported separately by the consignee.
b. Reported separately in the consignor's statement of financial position.
c. Combined with other inventory of the consignor.
d. Combined with other inventory of the consignee.

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

Select one:
a. Supplies
b. Finished goods
c. Raw materials
d. Goods in process

Which of the following costs of conversion cannot be included in cost of inventory?

Select one:
a. Cost of direct labor
b. Salaries of sales staff
c. Factory rent and utilities
d. Factory overhead based on normal capacity

Why is inventory included in the consumption of net income?

Select one:
a. To determine merchandise returns.
b. Inventory is not included in the computation of net income.
c. To determine cost of goods sold.
d. To determine sales revenue.

The valuation of inventory on a prime cost basis

Select one:
a. Is always achieved when FIFO is adopted
b. Would achieve the same results as direct costing
c. Is always achieved when standard costing is adopted
d. Would exclude all overhead from inventory cost

In a periodic inventory system, the beginning inventory is

Select one:
a. Net purchases minus cost of goods sold
b. Total goods available for sale minus net purchases
c. Total goods available for sale minus cost of goods sold
d. Net purchases minus ending inventory

Which of the following accounts is not reported in inventory?

Select one:
a. Raw materials
b. Equipment
c. Finished goods
d. Supplies

Which of the following should be included in inventory?

Select one:
a. Goods received from another entity on consignment
b. Goods in transit purchased FOB destination
c. Goods in transit to a customer sold FOB shipping point
d. Goods in transit purchased FOB shipping point

Which of the following cost should not be included as part of the cost of inventory?

Select one:
a. All of these are included in inventory.
b. Conversion cost
c. Import duties
d. Abnormal freight

A consignee paid the freight cost for goods shipped from a consignor. The freight cost is to be deducted
from the consignee's payment to the consignor when the consigned goods are sold. Until the consignee
sells the goods, the freight cost should be included in the consignee's

Select one:
a. Freight out
b. Distribution cost
c. Cost of goods sold
d. Accounts receivable

Which of the following should be included in inventory?

Select one:
a. Goods received from another entity for sale on consignment
b. None of these should be included.
c. Goods in transit which were purchased FOB destination.
 d. Goods sold to a customer which are being held for the customer to call for at customer
convenience.

Theoretically, cash discounts permitted on purchased raw materials should be

Select one:
a. Added to other income, only if taken
b. Deducted from inventory, only if taken
c. Deducted from inventory, whether taken or not
d. Added to other income, whether taken or not

When inventory is misstated, the presentation lacks

Select one:
a. Comparability
b. All of the choices are correct
c. Faithful representation
d. Relevance

Which of the following is incorrect about the perpetual inventory method?

Select one:
a. The entry to record a sale includes a debit to cost of goods sold and a credit to inventory.
b. Purchases are recorded as debit to the inventory account.
c. Purchase returns are recorded by debiting accounts payable and crediting purchase returns and
allowances.
d. After a physical inventory count, inventory is credited for any missing inventory.

The use of a purchase discount lost account implies that the cost of a purchased inventory is the

Select one:
a. Invoice price less the purchase discount allowable taken or not taken
b. Invoice price
c. List price
d. Invoice price less the purchase discount taken

Inventories encompass all of the following, except

Select one:
a. Finished goods produced
b. Materials and supplies awaiting use in the production process
c. Land and other property not held for sale
d. Merchandise purchased by a retailer

Which of the following is a characteristic of a perpetual inventory system?

Select one:
a. Cost of goods sold is recorded with each sale.
b. Cost of goods sold is determined as the amount of purchases less the change in inventory.
c. Inventory records are not kept for every item.
d. Inventory purchases are debited to a purchase account.

An entry debiting inventory and crediting cost of goods sold would be made when

Select one:
a. Merchandise is sold and the periodic inventory method is used.
b. Merchandise is returned and the periodic inventory method is used.
c. Merchandise is sold and the perpetual inventory method is used.
d. Merchandise is returned and the perpetual inventory method is used.

A discount given to a customer for purchasing a large volume of merchandise is typically referred to as

Select one:
a. Cash discount
b. Size discount
c. Trade discount
d. Quantity discount

Cost which are inventoriable include all of the following, except

Select one:
a. Selling cost of a sales department.
b. Cost that are directly connected with the bringing of goods to the place of business of the buyer.
c. Buying cost of a purchasing department.
d. Cost that are directly connected with the converting of goods to a salable condition.