Final Accounts Test 15

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Final Accounts Test 15

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Weekly Quiz Competition

Question 1
1 / -0

Cost of inventories includes ___________________.

A
Direct Material $$+$$ Direct Expenses

B
Direct Labour $$+$$ Direct Expenses

C
All cost of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition

D
Direct material only
Question 2
1 / -0

Inventories are assets __________________.

A
Held for sale in the ordinary course of business

B
In the production process for such sale

C
In the form of material or supplied to be consumed in the production process or in the rendering of service

D
All of the above
Question 3
1 / -0

All revenue expenditure and receipts are taken to ____________.

A
Trading and Profit and Loss Account

B
Balance sheet

C
Trial balance

D
None of these
Question 4
1 / -0

Which one of the following methods of inventory valuation matches current cost with current revenues?

A
Last in first out (LIFO)

B
Fist in first out (FIFO)

C
Simple average

D
Weighted average
Question 5
1 / -0

Net realizable value is ____________________.

A
The estimated selling price less the estimated costs of the sale

B
Total sales

C
Sales minus sales return

D
Sales minus purchases
Question 6
1 / -0

Rs.1,95,000, December. The amount to be debited to Profit and loss account would be _______________.

A
$$Rs. 2,03,000$$

B
$$Rs. 1,95,000$$

C
$$Rs. 1,08,000$$

D
$$Rs. 95,000$$
Question 7
1 / -0

In which of the following methods, inventory is valued at the latest prices prevailing in the market?

A
LIFO

B
FIFO

C
Both (a) and (b)

D
None of these

Solution

First In, First Out (FIFO) is part of an accounting method where assets which are acquired first are sold of first. The method FIFO considers the inventory as consisting of items bought in the end. The method of FIFO is contrary to another method LIFO in which goods purchased at last are sold first.
In general w.r.t. the FIFO method, the older costs or those lower are assigned as costs to the goods sold under inflationary market conditions. This results in an increase in the net income of the company. The balance quantity of inventory will include goods which are bought last or purchased in the recent past. Hence, such goods are shown at the latest prices prevailing in the market.
Therefore, B is the correct option.
Question 8
1 / -0

FIFO is advisable in case of _____________.

A
Rising prices

B
Falling prices

C
Constant prices

D
Fluctuating prices

Solution

The first in, first out (FIFO) method of inventory valuation is a cost flow assumption that the first goods purchased are also the first goods sold. In case of falling prices, when the older inventory items were purchased when prices were higher, using the FIFO method would benefit the company since the higher expense total for the cost of goods sold would reduce net income and taxable income.
Question 9
1 / -0

Inventory is valued at _____________.

A
Cost price

B
Replacement price

C
Both (a) and (b) whichever is lower

D
Both (a) or (b) whichever is higher

Solution

Generally accepted accounting principles (GAAP) require that all inventory reserves be stated and valued using either the cost or the market value method, whichever is lower.
Therefore, C is the correct option.
Question 10
1 / -0

Which one of the following statements are correct?
(i) Inventory includes raw materials, finished goods and goods in process
(ii) Inventory is a part of the working capital
(iii) Inventory includes goods likely to be purchased in the coming months
Select the correct answer using the codes given below.

A
I, II and III

B
II and III

C
I and III

D
I and II

Solution

Inventory is current asset of the firm. It is basically a schedule of all materials held by the company for the purpose of production or sale in the near future.
The term inventory includes all types of stocks – raw material, work progress, finished goods, tools, spare parts etc.

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Final Accounts Test 15

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Final Accounts Test 15

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SHARING IS CARING

Question 1

Direct Material $$+$$ Direct Expenses

Direct Labour $$+$$ Direct Expenses

All cost of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition

Direct material only

Question 2

Held for sale in the ordinary course of business

In the production process for such sale

In the form of material or supplied to be consumed in the production process or in the rendering of service

All of the above

Question 3

Trading and Profit and Loss Account

Balance sheet

Trial balance

None of these

Question 4

Last in first out (LIFO)

Fist in first out (FIFO)

Simple average

Weighted average

Question 5

The estimated selling price less the estimated costs of the sale

Total sales

Sales minus sales return

Sales minus purchases

Question 6

$$Rs. 2,03,000$$

$$Rs. 1,95,000$$

$$Rs. 1,08,000$$

$$Rs. 95,000$$

Question 7

LIFO

FIFO

Both (a) and (b)

None of these

Solution

Question 8

Rising prices

Falling prices

Constant prices

Fluctuating prices

Solution

Question 9

Cost price

Replacement price

Both (a) and (b) whichever is lower

Both (a) or (b) whichever is higher

Solution

Question 10

I, II and III

II and III

I and III

I and II

Solution

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