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09 Inventories
This quiz is centered around accounting concepts related to inventory management, including types of assets, inventory valuation methods (such as FIFO), cost of purchases, journal entries for inventory transactions, calculation of gross profit, impairment loss on inventory, effects of inventory errors on financial statements, and insurance claims related to inventory losses.
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Jake is a trader of office equipment and he purchased a laser printer for resale. In this transaction, the laser printer bought is considered a ______________.
non-current asset
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Add RecommendationAdd TagsView All Assigned Tagscurrent liability
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Add RecommendationAdd TagsView All Assigned Tagscurrent asset
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Add RecommendationAdd TagsView All Assigned Tagsnon-current asset as well as a current asset
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Which of the following are examples of non-accounting information that businesses should consider when making decisions about purchasing inventory?
i) Types of storage
i) Types of storage
ii) Cost of inventory
iii) Storage cost
iv) Nature of product
i) only
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Add RecommendationAdd TagsView All Assigned Tagsi) and iii)
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Add RecommendationAdd TagsView All Assigned Tagsii) and iii)
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Add RecommendationAdd TagsView All Assigned Tagsi) and iv)
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Identify the items that would be included in the inventory of a furniture shop:
(i) Sofa sets for sale to customers
(ii) Shelves for display of ornaments for sale to customers
(iii) Tables and chairs for sale to customers
(iv) High stools for customers' use at the cashier's counter
(i) Sofa sets for sale to customers
(ii) Shelves for display of ornaments for sale to customers
(iii) Tables and chairs for sale to customers
(iv) High stools for customers' use at the cashier's counter
(i) and (iii)
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Add RecommendationAdd TagsView All Assigned Tags(ii) and (iv)
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Add RecommendationAdd TagsView All Assigned Tags(ii) and (iv)
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Add RecommendationAdd TagsView All Assigned TagsAll of the above
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Delivery cost from the warehouse to the retail store
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Add RecommendationAdd TagsView All Assigned TagsSalary of the salesman who sold the goods
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Add RecommendationAdd TagsView All Assigned TagsCost of repackaging the goods for sale
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Add RecommendationAdd TagsView All Assigned TagsImport duties for goods purchased overseas
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Dr Inventory; Cr Trade Payables
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Add RecommendationAdd TagsView All Assigned TagsDr Inventory; Cr Cash at bank
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Add RecommendationAdd TagsView All Assigned TagsDr Inventory; Cr Trade Receivable
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Add RecommendationAdd TagsView All Assigned TagsDr Inventory; Cr Capital
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Which of the following statements regarding FIFO accounting for inventories is correct?
FIFO assumes that the costs of the earliest goods acquired are the first to be sold.
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Add RecommendationAdd TagsView All Assigned TagsFIFO assumes that the costs of the earliest goods acquired are the last to be sold.
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Add RecommendationAdd TagsView All Assigned TagsIt is generally good business management to sell the most recently acquired goods first.
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Add RecommendationAdd TagsView All Assigned TagsUnder FIFO, the ending inventory is based on the latest units purchased.
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Dr Trade payable; Cr Inventory
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Add RecommendationAdd TagsView All Assigned TagsDr Trade receivable; Cr Sales revenue
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Add RecommendationAdd TagsView All Assigned TagsDr Cost of sales; Cr Inventory
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Add RecommendationAdd TagsView All Assigned TagsDr Cash at bank; Cr Sales revenue
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A company just starting in business purchased three inventory items at the
following prices.
March 2, $75; March 7, $80; and March 15, $90. If the company sold two units for $125 each on March 10 and March 20, and used the FIFO method, the gross profit for March would be
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100
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Add RecommendationAdd TagsView All Assigned Tags95
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Add RecommendationAdd TagsView All Assigned Tags90
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Add RecommendationAdd TagsView All Assigned Tags75
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Hardaway Inc. purchased inventory as follows:
The following sales were made in January:
Jan 12 700 units at $28
Jan 25 300 units at $30
Hardaway Inc. had no beginning inventory and has 500 units on hand as of January 31. Assuming the first-in-first-out method is used, the cost of sales for January would be:
9500
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Add RecommendationAdd TagsView All Assigned Tags21 900
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Add RecommendationAdd TagsView All Assigned Tags7000
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Add RecommendationAdd TagsView All Assigned Tags15400
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Mandy Phones is a retailer of smartphones. At 1 January 2024, the valuation of its inventory was $2 300 for 10 smartphones. Its purchases for the year ended 31 December 2024 were as follows:
Additional information:
(i) The business uses the FIFO (First In First Out) method of inventory valuation.
(ii) During the year ended 31 December 2025, 65 smartphones were sold.
What was the total cost of smartphones sold during the year ended 31 December 2024 by Mandy Phones?
15 250
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Add RecommendationAdd TagsView All Assigned Tags14 300
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Add RecommendationAdd TagsView All Assigned Tags13 550
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Add RecommendationAdd TagsView All Assigned Tags11 800
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Prudence theory
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Add RecommendationAdd TagsView All Assigned TagsMatching theory
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Add RecommendationAdd TagsView All Assigned TagsAccrual theory
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Add RecommendationAdd TagsView All Assigned TagsMateriality theory
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At the higher of cost or net realizable value
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Add RecommendationAdd TagsView All Assigned TagsAt historical cost
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Add RecommendationAdd TagsView All Assigned TagsAt market value
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Add RecommendationAdd TagsView All Assigned TagsAt the lower of cost or net realizable value
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Inventory that originally cost $10 000 was written down to its net realizable value of $8 500 at the end of 2021. At the end of 2022, the net realizable value is determined to be $10 500. At what amount should the inventory be reported on the December 31 2022 statement of financial position?
8 500
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Add RecommendationAdd TagsView All Assigned Tags9 500
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Add RecommendationAdd TagsView All Assigned Tags10 000
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Add RecommendationAdd TagsView All Assigned Tags10 500
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Liability
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Add RecommendationAdd TagsView All Assigned TagsExpense
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Add RecommendationAdd TagsView All Assigned TagsRevenue
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Add RecommendationAdd TagsView All Assigned TagsAsset
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If the ending inventory is overvalued in the current period by $50 and no adjustment is made, the gross and profit for the year will be:
No effect on gross profit; Profit will be overstated $50
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Add RecommendationAdd TagsView All Assigned TagsGross profit understated by $50; Profit will be understated $50
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Add RecommendationAdd TagsView All Assigned TagsGross profit overstated by $50; Profit will be overstated $50
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Add RecommendationAdd TagsView All Assigned TagsNo effect on gross profit; Profit will be understated $50
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If beginning inventory is understated by $1000, the effect of this error in the current period is
Cost of sales Overstated; Profit Overstated
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Add RecommendationAdd TagsView All Assigned TagsCost of sales Understated; Profit Understated
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Add RecommendationAdd TagsView All Assigned TagsCost of sales Understated; Profit Overstated
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Add RecommendationAdd TagsView All Assigned TagsCost of sales Overstated; Profit Understated
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an understatement of profit of the next period.
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Add RecommendationAdd TagsView All Assigned Tagsno effect on profit of the next period.
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Add RecommendationAdd TagsView All Assigned Tagsan overstatement of profit of the next period.
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Add RecommendationAdd TagsView All Assigned Tagsan overstatement of the ending inventory of the next period.
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A furniture trader lost $4 000 worth of inventory due to a burglary. The insurance company has agreed to compensate the trader 80% of this loss. The journal entry to record this transaction is
DR Insurance claim receivable $3200 DR Impairment loss on inventory $800; CR Inventory $4 000
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Add RecommendationAdd TagsView All Assigned TagsDR Insurance claim receivable $800 DR Impairment loss on inventory $3 200; CR Inventory $4 000
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Add RecommendationAdd TagsView All Assigned TagsDR Insurance claim receivable $4 000 DR Impairment loss on inventory $800; CR Inventory $3 200
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Add RecommendationAdd TagsView All Assigned TagsDR Insurance claim receivable $3 200 DR Impairment loss on inventory $4 000; CR Inventory $800
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Your Result Type is Failed
Students who fail the quiz on inventory may need to review fundamental concepts related to inventory management, such as inventory valuation methods, journal entries for inventory transactions, and effects of inventory errors on financial statements. It is important to focus on understanding the basics before attempting similar quizzes in the future.
Don't be discouraged by the results. Use this as an opportunity to strengthen your understanding of inventory concepts. Consider revisiting the topics covered in the quiz and seek additional resources or assistance if needed.
Suggestions for Improvement:
Don't be discouraged by the results. Use this as an opportunity to strengthen your understanding of inventory concepts. Consider revisiting the topics covered in the quiz and seek additional resources or assistance if needed.
Suggestions for Improvement:
- Spend more time studying inventory management principles, especially focusing on areas where you faced difficulties in the quiz.
- Practice journal entries for inventory transactions and ensure a clear understanding of how different factors impact financial statements related to inventory.
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Your Result Type is Pass
Students who pass the quiz on inventory have demonstrated a satisfactory understanding of key concepts related to inventory management. They have successfully grasped topics such as inventory valuation methods, cost of purchases, and effects of inventory errors on financial statements.
Congratulations on passing the quiz! Your current level of understanding reflects a solid foundation in inventory management concepts. Keep up the good work and continue to build upon this knowledge in future studies.
Suggestions for Improvement:
Congratulations on passing the quiz! Your current level of understanding reflects a solid foundation in inventory management concepts. Keep up the good work and continue to build upon this knowledge in future studies.
Suggestions for Improvement:
- To further enhance your skills in inventory management, consider exploring more advanced topics or challenging yourself with additional practice quizzes.
- Focus on refining your understanding of complex inventory valuation methods and their practical applications.
- Focus on refining your understanding of complex inventory valuation methods and their practical applications.
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Your Result Type is Excellent
Students who excelled in the quiz on inventory have demonstrated a high level of proficiency in inventory management concepts. They have showcased a deep understanding of inventory valuation methods, journal entries for inventory transactions, and implications of inventory errors on financial statements.
Exceptional job on excelling in the quiz! Your mastery of inventory concepts sets you apart and showcases your dedication to learning. Keep pushing yourself to explore new challenges and continue expanding your expertise in this area.
Suggestions for Improvement:
- While excelling in the quiz, consider delving into more advanced topics or seeking opportunities to apply your knowledge in real-world scenarios.
- Engage in discussions with peers or instructors to deepen your understanding further and consider pursuing specialized studies in inventory management for continued growth.
Exceptional job on excelling in the quiz! Your mastery of inventory concepts sets you apart and showcases your dedication to learning. Keep pushing yourself to explore new challenges and continue expanding your expertise in this area.
Suggestions for Improvement:
- While excelling in the quiz, consider delving into more advanced topics or seeking opportunities to apply your knowledge in real-world scenarios.
- Engage in discussions with peers or instructors to deepen your understanding further and consider pursuing specialized studies in inventory management for continued growth.
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