4 Which ofthe following statements about the treatment of inventory and workin progress in financial statements are correct? 1 Inventory should be valued at the lower of cast and net realisable value 2 Invaluing workin progress, materials costs, labour costs and variable and fixed ‘roduction overheads must be included 3 Inventory items can be valued using either last in frst out (LIFO), oF weighted average cost ‘A company's financial statements must disclose the accounting policies used in ‘measuring inventories All our statements 4,2and4 2,3and4 ‘Land 3 only 0000 A business received delivery of goods on 29 Nevember 2012 which were included in the inventory valuation at 30 November 2022. The invoice for the goods was recorded in December 2012. What effect will thie have on the financial statements at 20 November 2012? Prof Netareate Overstated ° ° understated ° ° In preparing its financial statements for the current year, a company’s closing inventory was overstated by $50,000. What will be the effect ofthis ertor inthe financial statements if it remains uncorrected? ‘Current year Next year profit profit Overstated ° ° Understated ° ° ‘Smile Co values inventories on the frst in frst out (FIFO) basis. During October 2012 the: following inventory movements were recorded: October Balance in inventory 130 items valued at $8 each 30ctober Purchase of 190 tems at $9 each 0ctober Sale of 150 tems for $12 each October Sale of 90 tems for $15 each 18 October Purchase of 290 items at $10 each 22October_ Sale of 70 items for $15 each ‘What was the closing value of inventory atthe end of October? 3 Which of the following casts should be included as part ofthe cost of inventories of finished ‘goods held by a manufacturing company? 1 Carriage inwards Carriage outwards Depreciation of factory plant Accounts department costs relating to wages for production employees and 3 2and 3 1,3and4 All four items 0000 #4Warner has inventories of garden chairs at 31 August 2012 which cost $32,000, After the year tend the chairs were sold for a total of $22,500. Warner incurred delivery costs of $1,500 and pid sales commission of 5% of the sales value. What should be the value of inventories in the statement of financial positon at 31 August 2012 8 ‘The value of inventory included in the financial statements of Samson as at 31 December 2012 \vas based on an inventory count performed on 4 January 2013 and amounted to $726,200. Between 31 December 2012 anid 4 Januaty 2013 the following transactions took place: Purchase of goods Sale of goods at a profit mark up of 40% on cost Return of goods to supplier ‘What adjusted figure should be included in Samson's financial statements for inventories at 31 December 20122 $753,850 $733,850 $718,550 696,650 o000 ‘The closing inventory of Duff amounted to $216,400 at cost, including the following: | 600 toms which had cost $4 each, all of which were sold after the reporting date for ‘$3 each, with selling expenses amounting to $200 for the batch | 100 lfferent items wiih had cost $30 each and which were found to be defective. Rectification work after the reporting date amounted to $500, after which the items were sold for $35 each, with selling expenses amounting to $250 What amount should be included in Duffs statement of financial postion fr inventories? $215,250 $215,450 $216,100 $216,400 2000 Sandy values its inventory using the fist in first out (FIFO) method, At 1 May 2012 the company had 700 desks in inventory, valued at $110 each, During the year ended 30 April 2013 the: following transactions took place: 13ul2012 Purchased 00 desks for $120 each Nov 2012 Sold 400 desks for $160 each 41 Feb 2013 Purchased 300 desks for $150 each 35 Apr2013 Sold 250 desks for $175 each What vas the value of the company’ closing inventory of desks at 30 April 20137 $120,000 110,500 $93,500 None of these figures 200010 _Lanesels three products, 8 and . The following information was avalable at the year end: a 8 c $ $ $ Orginal cost per unit 10 8 16 Estimated seling price per unit 3 2 4 Seling and distribution casts per unit 3 5 2 Units nits Units Closing Inventory 200 150 100 [What valu for inventory should be included in Lane's statement of financial position? $450 O s4250 $4,800 © $7750 411 Discovery values its inventory using the continuous weighted average cost method. tL January 2012 it has 220 silos of grain valued at $1,000 each, During 2012 the following transactions took place: 10 Mar 2012 Sold 80 ils for $1,100 each 18Mar2012 Purchased 100 silos for $940 each 30,ul2012 Sold 160 silos for $1,200 each 12Nov2012 Purchased 90 silos for $1,450 each ‘What was the value of the company’s closing inventery of grins at 31 December 2012? © $248,500 2 $208,500 © $156,500 2 $148,500 12 Which ofthe following statements about inventory valuation are correct? 1 Average cost and first in first out are both acceptable methods of a inventories ing atthe cost of, 2 Inventories of finished goods may be valued at labour and materials costs only, without including overheads 3. Inventories should be valued at the lowest of cost, net realisable value and replacement cost tmay be acceptable for inventories to be valued at selling price less extimated prafit margin tand3 2and 3 anda 2anda ° ° ° ° 15 Intimes of rising prices, what will be the effect on a business’ profits of using the following inventory valuation methods?14 The following information has been extracted from a company’s statement of profit or loss: 3 156,800 (209,750), 47,050 Opening inventory was $51,300 and purchases were $99,400, What was the value of closing inventory? s Quettions 15 and 16 relate to the following information: [At 31 March 2013 a company's trial balance included the following figures: Debts credit § Sales 342,800 Purchases 531,620 Returns 9215 11,700 Inventory at 1 April 2012 77,100 Closing inventory i valued at $36,500. 15 Whats cost of sales? © $500,520 © $508,735, © $512,220 0 _ $539,320 15 What isgross profit? © $342,280 © $333,065, © $318,880 © _ $204,265 17 Santos has inventories valued at cost of $412,300 in is statement of financial position at 130 June. Included in this amount are the following: | 350 Amples wich had cost $15 each which were sold after the reporting date for $12.50 ‘each, incurring selling costs of $700. IN 450 Bodules which hae! cost $20 each and which were found to be defective. The items ‘wore repaired ata total cst of $2,000 and were then sold for $14.50 each after the reporting date via a third party who charged commission of 5% on the sales price. What amount should be included in Santos’ statement of financial postion for inventory at 30 lune? 3 18 Which of the following statements about the valuation of inventory is correct? © Inventory items are normally tobe valued at the higher of cost and net realisable value © The cost of goods manufactured by an entity will include materials and labour only ‘Overhead costs cannot be included © UFOs an accepted valuation method for inventory. FIFO method for inventory O _Selling price less estimated profit margin may be used to arrive at cost if this gives @ ‘reasonable approximation to actual cost rnotan accepted valuation