The specific identification method of costing inventory would be unsuitable for which of the

following?

a. Works of art

b. Motor vehicles

c. Petrol at a service station

d. Gold jewellery

Products can be uniquely identified by using:

a. ledger account numbers.

b. photos.

c. bar codes.

d. purchase order numbers.

Under the periodic inventory system inventory purchased is debited to which account?

a. Purchases

b. Prepaid expenses

c. Inventory

d. Cost of sales

Under the perpetual inventory system an inventory variance can be calculated as the difference
between:

a. the total purchases for the period and the ending inventory balance.

b. beginning inventory less ending inventory.

c. None of these options. An inventory loss cannot be calculated using the perpetual inventory
system.

d. the balance of the inventory account in the ledger and the total of the physical stocktake.
Bailey Ltd sold goods to Andrews Ltd for $1000. Andrews Ltd paid the account 28 days later. Ignoring
GST, the correct entry in Bailey Ltd's books to record the payment by Andrews Ltd is:

a. DR Cash at bank $1000; CR Sales $1000

b. DR Accounts receivable $1000; CR Equity $1000

c. DR Accounts receivable $1000; CR Sales $1000

d. DR Cash at bank $1000; CR Accounts receivable $1000

Under the perpetual inventory system, three office desks were originally purchased on CR at $300
each plus 10% GST. If all three desks were sold to a customer at $550 each (including GST) what is
the correct entry to record the cost of the sale?

a. DR Cost of sales $900; CR Inventory $900

b. DR Cost of sales $1650; CR Sales $1650

c. DR Cost of sales $900; CR Sales $900

d. DR Cost of sales $900; DR GST receivable $90; CR Inventory $990

Novice Co purchased goods for $2500. While on display, the goods were damaged and it is
estimated that they can now only be sold for $1800. Additional marketing and distribution costs are
$200. The net realisable value of the goods is:

a. $2300.

b. $700.

c. $500.

d. $1600.

Under the periodic inventory system, what is the correct entry to record the cost of the sale of a
dining suite sold to a customer for $1650 including 10% GST? (The dining suite was originally
purchased on credit for $990 including GST of $90).

a. DR Purchases $900; CR Inventory $900

b. DR Purchases $1650; CR Sales $1650

c. The cost of each sale is not recorded under the periodic inventory system

d. DR Cost of sales $900; CR Inventory $900

The account used by the purchaser to record the amount of discount granted by its suppliers for
prompt payment is called the:

a. financial discount account.

b. discount allowed account.

c. discount taken account.

d. discount received account.

Major theoretical problem in accounting for inventory is:

a. deciding which goods are obsolete.

b. calculating the cost of purchases.

c. allocating costs between cost of sales and stock on hand.

d. counting the stock.

Under the perpetual inventory system, what is the correct entry for the credit purchase of 10 electric
keyboards at $100 per keyboard plus GST of 10%?

a. DR Inventory $1000; DR GST receivable $100; CR Accounts payable $1100

b. DR Inventory $1100; CR Accounts payable $1000; CR GST payable $100

c. DR Accounts payable $1100; CR Inventory $1000; CR GST payable $100

d. DR Inventory $1100; CR Accounts payable $1100

The main difference between a service and a retail business is that service businesses:

a. buy and sell goods in bulk.

b. convert raw materials into finished goods.

c. sell directly to consumers.

d. sell services rather than goods.

Cash (settlement) discounts are primarily issued to:

a. encourage customers to pay for purchases in cash.

b. provide discounts to customers who purchase goods in bulk quantities.

c. encourage customers to pay their account early.

d. encourage customers to purchase goods on CR.

If the invoice price for goods sold to a customer is $798, including GST, how much GST is to be
collected from the customer?

a. $72.55

b. $98.00

c.$79.80

d. Nil

Which of the following is not true of the periodic inventory system?

a. It identifies inventory variances.

b. Cost of sales can be calculated only after a physical stocktake.

c. It uses a purchases account.

d. It is the simplest system.

James Ltd sold goods to Cameron Ltd on credit for $2 500. Ignoring GST and Cost of Sales, the
correct accounting entry to record this transaction in James Ltd's books is:

a. DR Bank $2500; CR Sales $2500

b. DR Sales $2500; CR Accounts receivable $2500

c. DR Sales $2500; CR Cost of sales $2500

d. DR Accounts receivable $2500; CR Sales $2500

Which item should not be included in the statement of financial performance's cost of inventory?

a. Cost for normal storage of the goods.

b. Costs incurred in preparing the goods for sale

c. Costs associated with receiving and inspecting the goods

d. The purchase price of the goods.

If Michelle knows that the ending inventory at retail for her corner store is $22 000 and her cost to
retail percentage is 45%, her ending inventory at cost can be estimated as:

a. $9 900.

b. $31 900.

c. $40 000.

d.$12 100.

Fabulous Furniture uses a periodic inventory system. Many purchases and sales of goods occur
during the financial year. For Fabulous Furniture, the balance in the general ledger inventory
account:

a. reports the goods purchased since the beginning of the accounting period.

b. will usually be zero except at a balance date.

c. represents the goods on hand at any given point in time.

d. does not change until a stocktake is carried out.

A major theoretical problem in accounting for inventory is:

a. allocating costs between cost of sales and stock on hand.

b. counting the stock.

c. deciding which goods are obsolete.

d. calculating the cost of purchases.

With regards to the statement of financial performance for a retailer, which of the following
statements is correct?

a. The cost of sales section is the same no matter whether the periodic or perpetual inventory
system is used.

b. Expenses are classified into the groupings selling expenses, distribution expenses, and
administrative and finance expenses.
c. Under the periodic system freight inwards is added to the cost of purchases.

d. Interest revenue is added to sales revenue to calculate gross profit.

If beginning inventory was $20 000, total purchases for the period were $80 000, freight-in was $4
000 and ending inventory was $45 000, the cost of sales for the period would be:

a. $84 000

b. $51 000

c. $76 000

d. $59 000

In relation to discount terms, what does 5/7, n/30 mean?

a. 50% discount if paid with 7 days, otherwise 30% discount.

b. 5% discount to be deducted from the invoice price if payment is made within 7 days or the full
amount is due within 30 days of the invoice date.

c. 50% discount, November 30th.

d. Invoice due on 5th July or 30th November.

Goods held for sale by a retailer in the normal course of business are known as:

a. inventory, stock, raw materials.

b. stock, inventory work-in-process.

c. merchandise, inventory.

d. stock, inventory, stock-in-trade.

The ____________ inventory system involves keeping a current and continuous record of the
movement in each item of inventory.

a. perpetual

b. physical

c. current

d. periodic
Which statement relating to the moving average method of costing inventories, used with the
perpetual inventory system, is incorrect?

a. The formula for average cost is cost of goods available for sale divided by units for sale.

b. A new average cost is calculated after each purchase return.

c. A new average cost is calculated after each sale

d. In periods of rising prices the profit result is between that of the FIFO and LIFO methods.

Marlin Co. uses a periodic inventory system with the specific identification method of cost
assignment. Inventory purchases for the month of August were:

On 24 August 1200 units from beginning inventory and 1000 units from the 16 August purchase
were sold. What was the value of ending inventory at 31 August?

a. $21 600

b. $36 700

c. $39 600

d. $58 300

Under IAS 2/AASB 102 the costing method that is not permitted is:

a. specific identification.

b. FIFO.

c. weighted/moving average.

d. LIFO.