Please answer

1. Inventories are

a. Assets held for sale in the ordinary course of

business, in the process of production for such

sale, or in the form of materials or supplies to be

consumed in the production process or in the

rendering of services.

b. Tangible items that are held for use in the

production or supply of goods or services, for

rental to others, or for administrative purposes;

and are expected to be used during more than one

period.

c. Properties held to earn rentals or for capital

appreciation or both.

d. Identifiable non-monetary assets without physical

substance.

2. Which of the following will not qualify as inventory?

a. Dogs that a pet shop buys from breeders that it

then sells.

b. Cryptocurrencies for sale in the ordinary course of

business.

c. Lubricants that are consumed by an entity's

machinery in producing goods.

d. Plant held for sale.

3. La Union Company included the following items under

inventories:

Materials on hand P1,200,000

Materials in transit shipped FOB

shipping point

470,000

Materials in transit shipped FOB

destination

350,000

Advances for materials ordered 200,000

Goods in process 900,000

Finished goods in factory 3,000,000

Finished goods in company-owned

retail stores, including 50% profit

on cost

750,000

Finished goods in hands of consignees

including 40% profit on sales

400,000

Goods held on consignment, at sales

price, cost P150,000

300,000

Finished goods in transit to customers,

shipped FOB seller, at cost

250,000

Finished goods in transit to customers,

shipped FOB buyer, at cost

150,000

Unsalable finished goods, at cost 30,000

Office supplies 40,000

Advertising catalogs and shipping

boxes

150,000

Compute the amount to be presented as "Inventories"

under current assets.

a. P6,460,000 c. P6,560,000

b. P6,510,000 d. P6,610,000

4. The inventory on hand at December 31 for Fair

Company valued at a cost of P947,800. The following

items were not included in this inventory amount:

a. Purchased goods, in transit, shipped FOB

destination invoice price P32,000 which included

freight charges of P1,600.

b. Goods held on consignment by Fair Company at a

sales price of P28,000, including sales commission

of 20% of the sales price.

c. Goods sold to Garcia Company, under terms FOB

destination, invoiced for P18,500 which includes

P1,000 freight charges to deliver the goods.

Goods are in transit.

d. Purchased goods in transit, terms FOB origin,

invoice price P48,000, freight cost, P3,000.

e. Goods out on consignment to Manil Company,

sales price P36,400, shipping cost of P2,000.

Assuming that the company's selling price is 140% of

inventory cost, the adjusted cost of Fair Company's

inventory at December 31 should be

a. P1,055,700 c. P1,039,300

b. P1,039,500 d. P1,037,300

5. What is the principle for recognition of inventory in

accordance with PAS 2?

a. Recognition of inventory is not specified in PAS 2.

b. Inventory is recognized when, and only when, the

entity obtains the risks and rewards of ownership

of inventory and has the ability to dispose of the

inventory

c. Inventory is recognized when, and only when, the

entity becomes a party to a purchase commitment.

d. Inventory is recognized when, and only when, it is

probable that future economic benefits will flow to

the entity and the cost or value of the inventory

can be measured reliably.

6. In accordance with PAS 2, inventories are required to

be measured at the

a. Cost

b. Net realizable value

c. Fair value less costs to sell

d. Lower of cost and net realizable value

7. Which statement is incorrect regarding costs of

inventories?

a. The cost of inventories should comprise all costs of

purchase, costs of conversion and other costs

incurred in bringing the inventories to their present

location and condition.

b. Trade discounts, rebates and other similar items

are deducted in determining the costs of purchase.

c. It may be appropriate to include non-production

overheads or the costs of designing products for

specific customers in the cost of inventories.

d. Foreign exchange differences arising directly on

the recent acquisition of inventories invoiced in a

foreign currency are included in cost of inventories.

8. Costs of purchase do not include

a. Purchase price.

b. Import duties and other non-refundable taxes.

c. Transport, handling and other costs directly

attributable to the acquisition of finished goods,

materials and services.

d. Fixed and variable manufacturing overheads.

9. Costs of conversion do not include

a. Direct labor.

b. Fixed factory overhead.

c. Variable factory overhead.

d. Direct materials.

10. The following may be included in the cost of

inventories, except

a. Administrative overheads.

b. Storage costs.

c. Wasted materials, labor and other production

costs.

d. Selling costs.

Use the following information for the next two questions:

Roweena Corporation began operations in the current year.

During the year it incurred the following expenditures in

purchasing materials for producing its product:

Purchase price of raw materials = P3,000,000

Import duty and other non-refundable purchase taxes

= P800,000

Refundable purchase taxes = P100,000

Freight costs for bringing the goods from the supplier

to the factory raw material storeroom = P300,000

Costs of unloading the materials into the raw material

storeroom = P2,000

Packaging = P200,000

The entity received P53,000 volume rebate from a supplier

for purchasing more than P1,500,000 from the supplier

during the year.

The entity incurred the following additional costs in the

production run:

Salary of the machine workers in the factory =

P500,000

Salary of factory supervisor = P300,000

Depreciation of the factory building and equipment

used for production process = P60,000

Consumables used in the production process =

P20,000

Depreciation of vehicle used to transport the goods

from the raw materials storeroom to the machine floor

= P40,000

Factory electricity usage charges = P30,000

Factory rental = P100,000

Depreciation and maintenance of the entity's vehicle

used by the factory supervisor (50 per cent for official

use and 50 per cent for personal use) = P20,000.

Private use of the vehicle is an employee benefit.

The entity incurred the following administration expenses:

Depreciation of the administration building = P50,000

Depreciation and maintenance of vehicles used by the

administrative staff = P15,000

Salaries of the administration personnel = P305,000

Of the administration expenses 20 per cent are attributable

to administering the factory. The rest of the

administration expenses are attributable, in equal

proportion, to the sales and other non-production

operations (eg financing, tax and corporate secretarial

functions).

The entity incurred the following selling expenses:

Advertising costs = P30,000

Depreciation and maintenance of vehicles used by the

sales staff = P10,000

Salary of the administration personnel = P600,000

11. The total costs of purchase is

a. P3,747,000 c. P4,100,000

b. P4,047,000 d. P4,249,000

12. The total costs of conversion is

a. P1,134,000 c. P1,060,000

b. P1,144,000 d. P1,070,000

13. The following information pertains to King

Corporation's inventory in units:

Inventory, beginning 100,000

Purchases 900,000

Purchase returns 10,000

Received from consignors 220,000

Transferred to consignees 160,000

Sales (excluding consignments) 750,000

Sales - received from consignors 80,000

Sales - consignees 42,000

Sales returns - in good condition 8,000

Sales returns - unsalable 5,000

How many units should King Corporation include in its

inventory at the end of the period?

a. 193,000 c. 206,000

b. 201,000 d. 211,000

14. In accordance with the objective of PAS 2, a primary

issue in accounting for inventories is

a. The amount of cost to be recognized as an asset

and carried forward until the related revenues are

recognized.

b. The cost formulas to be used to assign costs to

inventories.

c. The measurement of inventories held by producers

of agricultural and forest products.

d. The measurement of inventories held by

commodity broker-traders.

15. Which statement is incorrect regarding cost formulas?

a. An entity shall use the same cost formula for all

inventories having a similar nature and use to the

entity.

b. For inventories with a different nature or use,

different cost formulas may be justified.

c. Both a and b.

d. Neither a nor b.

16. Which statement is incorrect regarding cost formulas?

a. Specific identification of cost means that specific

costs are attributed to identified inventory.

b. The FIFO formula assumes that the items of

inventory that were purchased or produced first

are sold first, and consequently the items

remaining in inventory at the end of the period are

those most recently purchased or produced.

c. Under the weighted average cost formula, the cost

of each item is determined from the weighted

average of the cost of similar items at the

beginning of a period and the cost of similar items

purchased or produced during the period.

d. Under the weighted average cost formula, the

average is calculated as each additional shipment

is received, regardless of the circumstances of the

entity.

17. When can an entity use last-in, first-out (LIFO)?

a. For items that are not ordinarily interchangeable.

b. For goods or services produced and segregated for

specific projects.

c. For items other than those mentioned in a and b.

d. Under no circumstances.