Inventory Valuation (1-10)

1. What does FIFO mean?

(a) Finished stock In Finished stock out

(b) Fabrications Inward Fabrications Outward

(c) Final Input Final Output

(d) First In First Out

Correct! Wrong!

2. Regardless of how long it takes to produce and sell inventory, inventory is always considered to be a?

(a) Current asset

(b) Current liability

(c) Long-term asset

(d) Stockholder's equity

Correct! Wrong!

3. The latest cost of inventories is changed to production but the old prices are changed to inventories on hand?

(a) Average

(b) LIFO

(c) FIFO

(d) Perpetual

Correct! Wrong!

4. An increase in inventories indicates that?

(a) More merchandise was purchased then the amount sold to customer

(b) Less merchandise was purchased then sold to the customer

(c) Not all purchases were cash

(d) Cash payments were more than purchases on account

Correct! Wrong!

5. Which type of inventory system is updated inventory system?

(a) Periodic inventory system

(b) Contingency inventory system

(c) LIFO

(d) Perpetual inventory system

Correct! Wrong!

6. What is the principal criterion used to distinguish between tangible assets and inventories?

(a) The physical substance of the asset

(b) The acquisition cost of the asset

(c) The nature of the company’s activity, which determines the purpose for which the asset is held

(d) The moment in the accounting period when the asset is acquired

Correct! Wrong!

7. Which of the following method is suitable for calculating the cost of inventory when actual costs of individual units of merchandise can be determined from the accounting records?

(a) FIFO Method

(b) LIFO Method

(c) Specific Identification Method

(d) Average Method

Correct! Wrong!

8. The inventories are recorded at the latest price but the production cost is changed old cost price?

(a) FIFO

(b) Average

(c) Both A & B

(d) None

Correct! Wrong!

9. Which one of the following methods for inventory valuation may be misleading when the units are identical?

(a) FIFO Method

(b) LIFO Method

(c) Specific Identification Method

(d) None

Correct! Wrong!

10. During September, Khan had sales of 148,000, which made a gross profit of 40,000. Purchases amounted to 100,000 and opening inventory was 34,000. The value of closing inventory was?

(a) Rs. 24,000

(b) Rs. 26,000

(c) Rs. 42,000

(d) Rs. 54,000

Correct! Wrong!

1. What does FIFO mean?

2. Regardless of how long it takes to produce and sell inventory, inventory is always considered to be a?

3. The latest cost of inventories is changed to production but the old prices are changed to inventories on hand?

4. An increase in inventories indicates that?

5. Which type of inventory system is updated inventory system?

6. What is the principal criterion used to distinguish between tangible assets and inventories?

7. Which of the following method is suitable for calculating the cost of inventory when actual costs of individual units of merchandise can be determined from the accounting records?

8. The inventories are recorded at the latest price but the production cost is changed old cost price?

9. Which one of the following methods for inventory valuation may be misleading when the units are identical?

10. During September, Khan had sales of 148,000, which made a gross profit of 40,000. Purchases amounted to 100,000 and opening inventory was 34,000. The value of closing inventory was?

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