1. Which of the following should not be taken
Investment property
into account when determining the cost of
inventory?
a. Storage cost of part of finished product
b. Trade discount
c. Recoverable purchase taxes
d. Import duties on shipping of inventory
inward
2. The cost of inventory does not included?
a. Salaries of factory staff
b. Storage cost necessary in the
production process
c. Abnormal amount of wasted materials
d. Irrecoverable purchase taxes
3. Which of the following cost of conversion
cost cannot be included in cost of
inventory?
a. Cost of direct labor
b. Factory rent utilities
c. Salaries and sales staff
d. Factory overhead based on the normal
capacity
4. Which of the following should be taken into
account when determining the cost of
inventories?
a. Storage cost of part of finished product
b. Abnormal freight in
c. Recoverable purchase tax
d. Interest on inventory loan
5. Cost incurred in bringing the inventory to the
present location and condition include?
a. Cost of designing product for specific
customers
b. Abnormal amount of wasted material
c. Storage cost not necessary in the
production process before a further
production stage
d. Distribution cost
6. Inventories encompass all of the following ,
except?
a. Merchandise purchase by the retailer
b. Land and other property not held for
sale
c. Finished goods produced
d. Materials and supplies for use in the
production
7. A property developer must classify
properties that it holds for sale in the
ordinary course of business as?
a. Inventory
b. Property, plant and equipment
c. Financial asset
d. Investment property
8. Factory supplies to be consumed in the
production process are reported as?
a. Inventory
b. Property, plant and equipment
c. Financial asset
d.
9. Which of the following should not reported as
inventory?
a. Land acquired for resale by areal estate
firm
b. Share and bonds held for resale by a
brokerage firm
c. Partially completed goods held by a
manufacturing entity
d. Machinery acquired by a manufacturing
entity
10. When determining the cost of an inventory,
which of the following should not included?
a. Interest on loan obtained to purchase
the inventory
b. Commission paid when inventory is
purchased
c. Labor cost of the inventory when
manufactured
d. Depreciation of plant, property and
equipment used in manufacturing
11. Theoretically, cash discount permitted
should be?
a. Added to other income, whether taken
or not
b. Added to other income, only if taken
c. Deducted from inventory, whether taken
or not
d. Deducted from inventory, only if taken
12. Which of the following generally would not
be taken separately accounted for in the
computation of the cost of goods sold?
a. Trade discount applicable to purchase
b. Cash discount taken
c. Purchase returns and allowance
d. Cost of transaction for merchandise
purchased
13. The use of purchase discount account
implies that the recorded cost of a purchased
inventory is?
a. Invoice price
b. Invoice price plus any purchases
discount lost
c. Invoice price less any purchases
discount taken
d. Invoice price less any purchases
discount allowable whether taken or not
14. The use discount lost account implies that
cost of a purchased inventory is?
a. Invoice price
b. List price
c. Invoice price less any purchases
discount taken
d. Invoice price less any purchases
discount allowable whether taken or not
15. The valuation of inventory on prime cost
basis?
 a. Would achieve the same results a 23. Which of the following reason why the
direct costing specific identification method may be
b. Would exclude all overhead from considered ideal for assigning cost to
inventory cost inventory and cost of goods sold?
c. Is always achieved when the standard a. The potential for manipulation of net
costing is adopted income is reduced
d. Is always achieved when the FIFO is b. There is no arbitrary allocation of cost
adopted c. The cost flow matches the physical flow
16. IFRS prohibits which cost flow assumption? d. It is applicable to all types of inventory
a. LIFO 24. IFRS required the specific identification
b. Specific identification method in a certain circumstance. Which of
c. Weighted average the following is likely to be a circumstance
d. Any of these cost flow assumption is where the specific identification method can
allowed be used?
17. What is the inventory pricing procedure in a. Unit price is low
which the oldest cost rarely have an effect b. Inventory turnover is low
on the ending inventory? c. Inventory quantities are large
a. FIFO d. All of the choices are likely circumstance
b. LIFO 25. Which of the following flow assumption is
c. Specific identification used for inventory when an entity builds
d. Weighted average townhouse?
18. In a period of falling price which inventory a. FIFO
method generally provides the lowest b. Specific identification
amount of ending inventory? c. Weighted average
a. Weighted average d. Any of these cost flow assumption
b. FIFO 26. Net realizable value is?
c. Moving average A. Current replacement cost
d. Specific identification B. Estimated selling price
19. Which inventory cost flow assumption would C. Expected selling price less
consistently result in the highest income in expected cost to complete and cost
period of rising prices or inflation? of disposal
a. FIFO D. Estimated selling price less
b. LIFO estimated cost to complete and cost
c. Weighted average of disposal
d. Specific identification 27. Inventories are usually written down to net
20. The costing of inventory must be deferred realizable value
until the end of the reporting period under A. Item by item
which of the following method of inventory B. By classification
valuation? C. By total
a. Moving average D. By segment
b. Weighted average 28. LCNRV is best described as the
c. LIFO perpetual A. Reporting of loss when there is a
d. FIFO perpetual decrease in the future utility below
21. Cost of goods sold is the same under the original cost
periodic system and perpetual system B. Method of determining cost of
using? goods sold
a. FIFO C. Assumption to determine inventory
b. LIFO flow
c. Weighted average D. Change in inventory value to net
d. Specific identification realizable value
22. The cost of inventories that are not ordinarily 29. LCNRV of inventory
interchangeable and goods produced and A. Is always either the net realizable
segregated foe specific project shall be value or cost
measured using/ B. Must be equal to net realizable
a. FIFO value
b. LIFO C. May sometimes be less than net
c. Average method realizable
d. Specific identification
 D. Must be equal to estimated selling
price less cost to complete and
cost of disposal
30. Which is the statement is true regarding
inventory write down and reversal of write
down
A. Reversal of inventory write down is
prohibited
B. Separate reporting of reversal of
inventory write down is required
C. An entity is required to record an
inventory write down in separate
loss account
D. All of the choice are correct
31. How should the trade discount be dealt with
when valuing inventories at the lower cost
and net realizable value
A. Added to the cost
B. Ignored
C. Deducted in arriving NRV
D. Deducted in arriving at cost
32. How should prompt payment discount be
dealt with when valuing inventories at
LCNRV
A. Added to cost
B. Ignored
C. Deducted in arriving at NRV
D. Deducted from cost
33. How should sales staff commission be dealt
with when valuing inventories at LCNRV
A. Added to cost
B. Ignored
C. Deducted from arriving at NRV
D. Deducted from cost
34. How should import duties be dealt with when
valuing inventories at LCNRV
A. Added to cost
B. Ignored
C. Deducted from arriving at NRV
D. Deducted from cost
35. Inventories shall be measured at
A. Cost
B. NRV
C. LCNRV
D. Lower cost and fair value
36. The gross profit method assumes that
A. The amount of gross profit is the
same as in prior years
B. Sales and cost of goods sold did
not change
C. Inventory values have not
increased
D. The relationship between selling
price and cost of goods sold is
similar in prior years
37. The gross profit method is not valid when
A. There is a substantial increase in
the quantity of inventory
B. There is a substantial increase in
the cost of inventory
C. The gross margin percentage
changes significantly
D. All ending inventory is destroyed by
fire
38. Which is the statement is valid about the
gross profit method
A. It may b used by creditors
B. It may be acceptable accounting
procedure
C. It may be used for interim statement
D. It may be used for annual statement
39. Which is not a basic assumption of the
gross profit method
A. The beginning inventory plus net
purchased equals total goods to be
accounted for
B. Goods not sold must be on hand
C. The sales reduced to cost basis
when deducted from the sum of
beginning inventory and net
purchased would result to
inventory on hand
D. The amount of purchases and the
amount of sales remain relatively
unchanged from the previous
period
40. How is the gross method used in relation to
inventory
A. To verify the accuracy of the
perpetual inventory record
B. To verify the accuracy of the
physical inventory
C. To estimate the cost of goods sold
D. To provide a FIFO inventory value.
41. An advantage of the retail inventory method
is that it
A. Permits entities to avoid an annual
physical count
B. Yields a more accurate
measurements of inventory
C. Hide cost from customer and
employees
D. Provides a method for inventory
control facilities determination of the
periodic inventory
42. To produce an inventory valuation which
approximates the lower of cost and NRV
using the retail method the computation of
the ratio of cost to retail should
A. Include markup but not markdown
B. Include markup and markdown
C. Ignore both markup and markdown
D. Include markdown but not markup
43. When the conventional retail method is used,
markdowns are ignored in computing cost
ratio because
 A. There may be no markdown during D. LIFO retail
the year 50. The retail method is based on the
B. This tends to give a better assumption that
approximation of the lower of A. Final inventory and the total GAS
average cost and net realizable contain the same proportion of high
value cost and low cost ratio of goods
C. Markups are also ignored B. Gross margin is the same each
D. This tends to show a normal profit period
margin in a period when no C. Ratio of cost to retail changes at a
markdown goods have been sold constant rate
44. The retail inventory method would include D. Proportion of markup and mark
which of the following at both cost and retail down.
A. Freight in
B. Purchase return
C. Markup
D. Markdown
45. Which is the most accurate statement about
retail method
A. Generally, accountants ignored net
markups and net markdowns in
computing the cost ratio
B. Generally, accountants exclude net
markups and net markdowns in
computing the cost
C. The retail method results in a lower
ending inventory if net markups are
include but net markdowns are
exclude in computing the cost ratio
D. It’s not adaptable to FIFO costing
46. The conventional retail method produces an
ending inventory that approximates
A. Lower of average cost and NRV
B. Lower of FIFO cost and NRV
C. Lower of LIFO cost and NRV
D. Lower of cost and NRV
47. If the conservative retail method is used
which calculation would include or exclude
net markdowns
Cost ratio. Ending inventory
A. Include. Include
B. Include. Exclude
C. Exclude. Include
D. Exclude. Exclude
48. Which of the following is not a reason why
the retail inventory method is used widely
A. As a control measures in
determining inventory shortage
B. For insurance information
C. To permit the computation of net
income without a physical count of
inventory
D. To defer income tax liability
49. An inventory method designed to
approximate inventory valuation at lower of
average cost and net realizable value is
A. Average retail method
B. FIFO retail
C. Conservative retail method