1. Which of the following should not be taken into account when determining the cost of inventory?

a. Storage costs of part-finished goods

b. Trade discounts

c. Recoverable purchase taxes 2.

d. Import duties on shipping of inventory inward.

2. The cost of inventory does not include

a. Salaries of factory staff

b. Storage cost necessary in the production process before a further production stage

c. Abnormal amount of wasted materials

d. Irrecoverable purchase taxes

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

a. Cost of direct labor

b. Factory rent and utilities

c. Salaries of sales staff

d. Factory overhead based on normal capacity

4. Which of the following should be taken into account when determining the cost of inventory?

a. Storage cost of part-finished goods

b. Abnormal freight in

c. Recoverable purchase tax

d. Interest on inventory loan

5. Costs 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 purchased by a retailer

b. Land and other property not held for sale

c. Finished goods produced

d. Materials and supplies for use in 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. Investment Property

d. Prepaid expenses

9. Which of the following should not be reported as inventory?

a. Land acquired for resale by a real estate firm

b. Shares and bonds held for resale by a brokerage firm

c. Partialy 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 be 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 equipment manufacturing

11. Why is inventory included in the computation of net income?

a. To determine cost of goods sold

b. To determine sales revenue

c. To determine merchandise returns

d. Inventory is not included in the computation of income

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

a. Inventory purchases are debited to a purchases account

b. Inventory records are not kept for every item.

c. Cost of goods sold is recorded with each sale.

d. Cost of goods sold is determined as the amount of purchases less the change in inventory.

13. Which of the following is incorrect about the perpetual Inventory method?

a. Purchases are recorded as debit to the inventory account.

b. The entry to record a sale includes a debit to cost of goods sold and a credit to inventory.

c. After a physical inventory count, inventory is credited for any missing inventory.

d. Purchase returns are recorded by debiting accounts payable and crediting purchase returns and allowances.

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

a. Merchandise is sold and the periodic inventory method is used.

b. Merchandise is sold and the perpetual inventory method is used.

c. Merchandise is returned and the perpetual inventory method is used.

d. Merchandise is returned and the periodic inventory method is used.