Stocks Questions)

T 3 –MAINTAINING FINANCIAL RECORDS INVENTORY ASAD EJAZ (ACCA, CISA, CIISA) 1. Inventory is valued using FIFO. Opening inventory was 10 units at $2 each. Purchases

were 30 units at $3 each, then issues of 12 units were made, followed by issues of 8 units.

What is closing inventory valued at? A. $50 B. $58 C. $60 D. $70

2. An organization’s inventory at 1 July is 145 units @ $3.00 each. The following

movements occur:

• 3 July 20X6 5 units sold at $3.30 each • 8 July 20X6 10 units bought a t$3.50 each • 12 July 20X6 8 units sold at $4.00 each

Closing inventory at 31 July, using the FIFO method of inventory valuation would be. A. $31.50 B. $36.00 C. $39.00 D. $41.00

3. Your organization uses the weighted average cost method of valuing inventories. During

August 20X1, the following inventory details were recorded.

Opening balance 30 units valued at $2 each 5 August purchases of 50 units at $2.40 each 10 August issue of 40 units 18 August purchase of 60 units at $2.50 each 23 August issue of 25 units

The value of the balance at 31 August 20X1 was

A. $172.50 B. $176.25 C. $180.00 D. $187.50

4. During September, your organization 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. $24,000 B. $26,000 C. $42,000 D. $54,000

5. Your firm values inventory using eh weighted average cost method. At 1 October 20X8,

there were 60 units in inventory valued at $12 each. On 8 October, 40 units were purchased for $15 each, and a further 50 units were purchased for $18 each on 14 October. On 21 October, 75 units were sold for $1,200.

T 3 –MAINTAINING FINANCIAL RECORDS INVENTORY ASAD EJAZ (ACCA, CISA, CIISA)

The value of closing inventory at 31 October 20X8 was A. $900 B. $1,020 C. $1,110 D. $1,125

6. Inventory movements for product X during the last quarter were as follows

January Purchases 10 items at $19.80 each February Sales 10 items at $30 each March Purchases 20 items at $24.50 each Sales 5 items at $30 each Opening inventory at 1 January was 6 items valued at $15 each Gross profit for the quarter, using the weighted average cost method, would be A. $135.75 B. $155.00 C. $174.00 D. $483.00

7. A firm has the following transactions with its product R

Year 1 Opening inventory: Nil Buys 10 units at $300 per unit Buys 12 units at $250 per unit Sells 8 units at $400 per unit Buys 6 units at $200 per unit Sells 12 units at $400 per unit Year 2 Buys 10 units at $200 per unit Sells 5 units at $400 per unit Buys 12 units at $150 per unit Sells 25 units at $400 per unit (a) Using LIFO:

At the end of the year 1, calculate closing inventory $ At the end of year 2, calculate cost of sales. $

(b) Using FIFO

At the end of the year 1, calculate closing inventory. $ At the end of the year 2, calculate cost of sales. $

8. Inventory is valued using FIFO. Opening inventory was 10 units at $2 each.

Purchases were 30 units at $3 each, then issues of 12 units were made, followed by issues of 8 units.

Closing inventory is valued at

9. Your organization uses the weighted average cost method of valuing inventories.

Opening balance 30 units valued at $2 each 5 August purchase of 50 units at $2.40 each

$


10 August issue of 40 units 18 August purchase of 60 units at $2.50 each 23 August issue of 25 units

The value of the balance at 31 August 20X1 was:

A. $172.50 B. $176.25 C. $180.00 D. $187.50

10. During September, your organization 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

11. What adjustment would be made to closing inventory if it was discovered that goods with a cost of $5,000 and a net realizable value of $3,000 had been omitted form the year end inventory count?

A. An increase of $5,000 B. An increase of $3,000 C. An increase of $2,000 D. A decrease of $2,000

12. At 30 June 20X2 Dilip’s inventory was valued at its cost of $45,400. This includes items

costing $2,600 which have been superseded by an update design. Dilip will be able to sell these items through an agent for $1,400. The agent’s commission will be 10% of selling price

The value of closing inventory at 30 June 20X2 is

13. Lavinia valued her inventory at 31 December 20X2 at its cost of $11,480. This includes some items which cost $975 which have been hard to sell. Lavinia intends to have these items repacked at a cost of $225. This will allow her to sell them for $450.

The value of closing inventory at 31 December 20X2 is

14. A retail business has the following two items of inventory at its year end.

Item Cost Net realizable value $ $ X 1,600 1,660 Y 1,400 1,250

Applying the prudence concept, what should be the valuation of this inventory in the balance sheet of the business?

$

$

$

$

T 3 –MAINTAINING FINANCIAL RECORDS INVENTORY ASAD EJAZ (ACCA, CISA, CIISA) 15. The closing inventory of X amounted to $116,400 excluding the following two inventory

lines:

1. 400 items which had cost $4 each. All were sold after the balance sheet date for $3 each, with selling expenses of $200 for the batch.

2. 200 different items which had cost $30 each. These items were found to be defective at the balance sheet date. Rectification work after the balance sheet date amounted to $1,200, after which they were sold for $35 each, with selling expenses totaling $300.

Which of the following total figures should appear in the balance sheet of X for inventory?

A. $122,300 B. $121,900 C. $122,900 D. $123,300

16. SH sells three products – Basic, Super and Luxury. The following information was

available at the year end:

Basic Super Luxury $ per unit $ per unit $ per unit

Original cost 6 9 18 Estimated selling price 9 12 15 Selling and distribution cost 1 4 5 Units Units Units Inventory: units held 200 250 150 The value of inventory at the year-end should be:

A. $4,200 B. $4,700 C. $5,700 D. $6,150

17. An inventory record card for item 1234 shows the following details.

February 1 50 units in opening inventory at a cost of $40 per unit 7 100 units purchased at a cost of $45 per unit 14 80units sold 21 50 units purchased at a cost of $50 per unit 28 60 units sold What is the value of inventory at 28 February using the FIFO method?

18. A company values its inventory using the first in, first out (FIFO) method. At 1 May 20X2 the company held 700 engines in inventory, valued at $190 each.

During the year ended 30 April 20X3 the following transactions took plac: 20X2 1 July Purchased 500 engines at $220 each 1 November Sold 400 engines for $160,000

$


20X3 1 February Purchased 300 engines at $230 3each 15 April Sold 250 engines for $125,000 What is the value of the company’s closing inventory of engines at 30 April 20X3? A. $188,500 B. $195,500 C. $166,000 D. None of these figures.

19. Your organization uses the Weighted Average Cost method of valuing inventories. During

august 20X7, the following inventory details were recorded:

Opening balance 30 units valued at $2 each 5 August purchase of 50 units at $2.40 each 10 August issue of 40 units 18 August purchase of 60 units at $2.50 each 23 August issue of 25 units The value of the balance eat 31 August 20X7 was: A. $172.50 B. $176.25 C. $180.00 D. $187.50

20. At 30 September 20X3 the closing inventory of a company amounted to $386,400. The

following items were included in this total at cost:

1. 1,000 items which had cost $18 each. These items were all sold in October 20X3 for $15 each, with selling expenses of $800.

2. Five items which had been in inventory since 1973, when they were purchased for $100 each, sold in October 20X3 for $1,000 each, net of selling expenses.

What figure should appear in the company’s balance sheet at 30 September 20X3 for inventory? A. $382,600 B. $384,200 C. $387,100 D. $400,600

21. LMN plc has just published its financial statements, which show a gross profit for the year

of $6.5 million. A major error in the inventory valuation has just been discovered. The opening inventory is overstated by $1.3 million, and the closing inventory has been understated by $1.6 million.

What should be LMN plc’s correct gross profit for the year?

A. $3.5m B. $6.2m C. $6.8m D. $9.4m

T 3 –MAINTAINING FINANCIAL RECORDS INVENTORY ASAD EJAZ (ACCA, CISA, CIISA) 22. NRV plc has the following items in its inventory as at its year end:

Cost Net realizable value $ $

Item A 1,000 1,200 Item B 800 500 1,800 1,700 How should NRV plc’s closing inventory be valued in the balance sheet? 23. What is the unit cost of the following item?

$ Raw materials 5.00 Labour 3.00 Manufacturing overheads 1.00 Variable administrative overheads 2.50

A. $5.00 B. $8.00 C. $9.00 D. $11.50

24. What is the net realizable value of the following item?

$ Selling price 20.00 Packaging costs 2.00 Delivery costs 3.00 License fee paid after delivery 2.50 25. A company includes in the valuation of its closing inventory some goods that were

received before the year end, but for which invoices were not received until after the year end. This is in accordance with:

A. The historical cost convention B. The accruals concept C. The consistency concept D. The materiality concept.

26. Percy Pilbeam is a book wholesaler. On each sale, commission of 4% is payable ot the

sales agent.

The following information is available in respect of total inventories of three of his most popular titles at his financial year-end: Cost Selling Price $ $ Henry VII – Shakespeare 2,280 2,900 Dissuasion – Jane Armstrong – Siddeley 4,080 4,000


Pilgrim’s Painful Progress – John Bunion 1,280 1,300 What is the total value of these inventories in Percy’s balance seet?

27. Suresh & Co sell three products – Basic, Super and Luxury. The following information was available at the year end:

Basic Super Luxury $ per unit $ per unit $ per unit

Original cost 6 9 18 Estimated selling price 9 12 15 Selling and distribution costs 1 4 5 Units Units Units Units held 200 250 150 The value of the inventory at the year end should be:

A. $4,200 B. $4,700 C. $5,700 D. $6,150

28. Ariene valued her inventory at 30 June 20X1 at its cost of $22,960. This includes some

items which cost $1,950 which have been hard to sell. Ariene intends to have these items repacked at a cost of $400. She can then sell them for $900.

What will be the value of closing inventory in Arlene’s accounts at 30 June 20X1? A. $22,960 B. $21,910 C. $21,510 D. $21,010

29. At 30 November 20X1 Kim’s inventory was valued at its cost of $22,700. This includes

items costing $1,300 which have been supersede by an updated design. Kim will be able to sell these items through an agent for $700. The agent’s commission will be 10% of selling price.

What is the value of closing inventory on 30 November 20X1?

30. Justin Ltd’s stock valuation also excludes a number of free samples from potential

suppliers. They would normally cost £300 and could probably be sold to Justin Ltd’s customers for £550.

The effect on the company’s profit of excluding this stock is that: A. Profit is understated by £250 B. Profit is understated by £300 C. Profit is understated by £550 D. Profit is stated correctly

T 3 –MAINTAINING FINANCIAL RECORDS INVENTORY ASAD EJAZ (ACCA, CISA, CIISA) 31. Jemima’s stock valuation includes certain damaged goods at their original cost of £2,655.

These could be repaired at a cost of £420 and sold for 2,900.

The effect on Jemima’s profit of including theses goods at cost is that: A. Profit is overstated by £175 B. Profit is overstated by £2,655 C. Profit is understated by £2,480 D. Profit is stated correctly

32. John Ltd’s stock valuation includes goods received from Jeremy Ltd on a sale or return

basis. The goods have been invoiced by Jeremy Ltd at £12,000 and John Ltd would expect to sell them to customers for £16,000. John Ltd has not recorded the purchase invoice in its books. The effect on John Ltd’s profit of including these goods in the stock valuation at their cost of £12,000 is that: A. Profit is overstated by £12,000 B. Profit is understated by £4,000 C. Profit is understated by £12,000 D. Profit is stated correctly

33. Jingle purchases goods with a list price of £8,000. the supplier grants a trade discount of

5% on list price, and Jingle also takes advantage of a settlement discount amounting to 2% of list price.

In Jingle’s balance sheet the value of this stock should be: A. £7,200 B. £7,600 C. £7,840 D. £8,000

34. Junket Ltd’s year end is 31 December. For various reasons, stock could not be counted

this year until 6 January. The stock valuation at this date was £74,300. Detailed records were kept of stock movements between the year end and the stocktake. The following figures (all stated at cost) are available:

£

Sales 1,250 Purchases 1,155 Returns inwards 275 Returns outwards 140

The value of stock in Junket Ltd’s balance sheet at 31 December is:

A. £74,070 B. £74,260 C. £74,340 D. £74,530

35. Jamboree’s draft balance sheet includes a stock figure of £25,850. On further

investigation, the following facts are discovered:


1) One stock sheet had been over-added by £212 and another under-added by £74.

2) Goods included at their cost of £460 had deteriorated. They could still be sold at their normal selling price (£800) once repair work costing £270 was complete

3) Goods costing £430 sent to customers on a sale to return basis had been included in stock at their selling price of £66.

The corrected figure for stock in Jamboree’s balance sheet is: A. £25,047 B. £25,477 C. £25,547 D. £25,753

36. The stock of Jordan Ltd includes the following three items

Supplier’s Net realizable list price value

£ £ Product A 240 272 Product B 281 385 Product C 172 157 693 814

At what total value should these items be stated in the balance sheet of Jordan Ltd? A. £678 B. £693 C. £814 D. £829

37. Jordan Ltd’s stock also includes three items for which the following details are available

Supplier’s Net realizable list price value £ £

Product D 3,600 5,100 Product E 2,900 2,800 Product F 4,200 4,100

10,700 12,000

The company receives a 2½ % trade discount from its suppliers, and also takes advantage of a 2% discount for prompt payment. At what total value should products D, E and F be stated in the balance sheet of Jordan Ldt? A. £10,219 B. £10,405 C. £10,428 D. £10,433

T 3 –MAINTAINING FINANCIAL RECORDS INVENTORY ASAD EJAZ (ACCA, CISA, CIISA) 38. Jehu’s accounts showed a gross pofit for the year of £27,200. After the accounts were

prepared it was found that the opening stock had been overstated by £1,200 while closing stock had been understated by £1,700.

What is the amount of Jehu’s corrected gross profit for the year?

A. £24,300 B. £26,700 C. £27,700 D. £30,100

39. The following details are taken from the books of Jumbo Ltd:

£ £

Opening stock 2,850 Purchases 37,640 Closing stock 4,270 Returns inwards 2,770 Carriage outwards 3,110 Carriage inwards 1,840 What is the company’s cost of goods sold?

A. £35,290 B. £38,060 C. £39,480 D. £41,170

40. Jenkins Ltd has 200 identical units of stock. Each one cost £60 originally and they would

be ready for sale after modification work costing £12 per unit. Their selling price would then be £100 each, but the company would incur selling costs of 8% of sales value.

Calculate the total balance sheet value of this stock. A. £12,000 B. £14,400 C. £16,000 D. £18,400

41. James Ltd purchased raw materials for £4,720 and paid £125 transporting the materials

to its own premises. Conversion costs incurred amounted to £2,115 by 31 December 19X8. At the date, cost of £845 were still required to get the goods into a saleable condition. The estimated eventual selling price is £8,200; selling and distribution costs will amount to 4% of selling price.

At what value should this work in progress be stated in the balance sheet of James Ltd at 31 December 19X8? A. £4,845 B. £6,960 C. £7,027 D. £7,872


Data for question 16 – 18 John makes purchases as follows in his first period of trading: Price Units per unit £ 3 January 19X8 15 26 18 February 19X8 35 28 11 March 19X8 28 23 20 April 19X8 45 32 12 May 19X8 10 33 20 June 19X8 8 35 On 27 June John sells 100 units for £40 each. 42. In his balance sheet at 30 June 19X8 what is the value of John’s stock, assuming

he uses the FIFO basis?

A. £1,118 B. £1,182 C. £1,346 D. £1,640

43. In his balance sheet at 30 June 19X8 what is the value of John’s stock, assuming

he uses the LIFO basis?

A. £1,118 B. £1,182 C. £1,346 D. £1,640

44. In his balance sheet at 30 June 19X8 what is the value of John’s stock assuming he uses

the average cost basis?

A. £1,118 B. £1,182 C. £1,346 D. £1,640

Data for question 19 – 21 Jones, a sole trader, had 3,000 components in stock at 1 January with a value of £1.74 each. During January and February the following stock movements occurred. Date Receipts Issues Quantity Unit price Quantity Unit price 5 January 20,000 £1.68 15 January 16,000 £1.68 20 January 24,000 £1.72 8 February 26,000 £1.75 10 February 24,000 £1.75 12 February 4,000 £1.735 25 February 20,000 £1.78 27 February 40,000 £1.75


45. What method is Jones using to charge issues to production?

A. LIFO B. FIFO C. Replacement cost D. Average cost

46. How many components remain in stock at the end of February?

A. 69,000 B. 49,000 C. 9,000 D. 6,000

47. What value will Jones place on his stock at the end of February?

A. £10,160 B. £15,300 C. £15,380 D. £15,600

48. Goods sent to a customer on a sale or return basis are to be included in stock at the year

end. The following details are available:

£ Cost of purchase 1,000 Cost of conversion 500 Carriage outwards 150 Selling costs 200 Selling price 2,000

At what value should the stocks be recorded in the balance sheet?

A. £1,500 B. £1,650 C. £1,800 D. £1,850

49. On which, recommended, basis should stocks be valued?

A. Cost B. Higher of cost or net realizable value C. Lower of cost or net realizable value D. Net realizable value.

50. A firm values its stock at cost. At the end of the year stock includes goods which had cast

$750 but which because of damage, will be sold for $250.

What happens when this is corrected?

Gross profit Net profit Current assets A. Increase by $250 increase by $250 decrease by $250 B. Increase by $500 increase by $500` decrease b$500 C. Decrease by $500 decrease by $500 decrease b$500


D. Decrease by $750 decrease by $750 decrease b$750 51. As per prudence concept, stock should be included in the balance sheet at.

A. Its cost B. Its net realizable value. C. The lower of its total cost and its total net realizable value D. The lower of its cost and its net realizable value on an item- by- item or category –

by- category basis. 52. A trade deals in three items only. At the end of the year their cost and net ralisable value

(NRV ) of each are as follows Cost NRV Item 1 $15,000 $12,000 Item 2 27,000 25,000 Item 3 15,000 10,000 Which figure is to be included in the firm’s balance sheet in respect of stock, is

A. $44,000 B. $47,000 C. $57,000 D. $60,000

53. If an item of stock which originally cost $1,400 can be sold for $1,700 after incurring

further completion costs of $230 and advertising costs of $110, them it should be included in the balance sheet stock valuation at.

A. $1,360 B. $1,420 C. $1,490 D. $1,600

54. When stocks are valued at lower of Cost or NRV, it obeys the concept of

A. Consistency concept. B. Going concern concept C. Prudence concept D. Accruals concept.

55. FIFO means

A. Fixed income Financial Operations B. Final interest – Free Option C. The first-in- First –Out method of approximating the cost of stock D. None of the above

56. LIFO means

A. Large integrated Financial Organisation B. Least interesting Financial Option C. The Last-In-First-Out method of approximating the cost of stock D. None of the above

T 3 –MAINTAINING FINANCIAL RECORDS INVENTORY ASAD EJAZ (ACCA, CISA, CIISA) 57. If stock valuation method is changed every year by the firm, which concept the firm has

violated

A. The materiality concept B. The consistency concept C. The prudence concept D. The going concern concept.

58. In times of rising prices, the FIFO method of inventory valuation, when compared to the

average cost method of inventory valuation, will usually produce

A. A higher profit and a lower closing inventory value B. A higher profit and a higher closing inventory value C. A lower profit and a lower closing inventory value D. A lower profit and a higher closing inventory value

59. Following the preparation of the income statement, it is discovered that accrued expenses of $1,000 have been ignored and that closing inventory has been overvalued by $1,300. This will have resulted in

A. An overstatement of net profit of $300 B. An understatement of net profit of $300 C. An overstatement of net profit of $2,300 D. An understatement of net profit of $2,300

60. In times of rising prices, the valuation of inventory using the FIFO method, as opposed to average cost, will result in which ONE of the following combinations?

Cost of sales Profit Closing inventories

A. Lower Higher Higher B. Lower Higher Lower C. Higher Lower Higher D. Higher Higher Lower

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