Assignment
Answer the following multiple choice questions. Give me the question number and the answers -no explanation. Thanks.
1. Which of the following are accounted for under IAS
The cows of a cattle farmer
The gold mineral reserves of a mining company
WIP of a long-term construction contract
Maturing wine in the cellars of a wine producer
Clothing in the warehouse of a retailer
Lumber of a wood distributor
2. Lumberjacks plc regularly rents some of its equipment to its customers. Should Lumberjacks classify this equipment as inventory?
Yes, because the customer has the ability to use the equipment.
No, because the equipment is rented and not sold. Lumberjacks still owns the equipment.
3. Which of the following are most likely to be classified directly as the components of inventory of an accounting firm prior to revenue being recognised under IAS 18?
Salaries of the client service accountants
Costs of brochures sent directly to clients
Travel costs to client locations
An allocation of salary costs of technology support staff assisting client service accountants with computer auditing techniques
An allocation of salary costs of the firm's accounts payable clerk
Costs of material used to prepare clients' reports
4. How should cash discounts that are received for the purchase of inventory be recognised?
Revenue
Reduction of the cost of inventory
It has no impact on the measurement of inventory
5. Just Jeans Ltd is a clothing retailer. Which of the following costs would it record as a cost of purchase?
Costs to ship the jeans from a supplier to the warehouse
Costs to ship the jeans from the warehouse to a retail store
Reimbursable import duties from a taxing authority
Storage costs of the jeans while in transit to the warehouse
Salary of the purchasing manager in the accounts department
6. The UK subsidiary of YeastFeast & Co measures raw material inventory using the FIFO method. The French subsidiary of YeastFeast & Co measures the same raw material inventory using the weighted average cost method. Is this permitted under IAS 2?
No. Costs formulas should be consistently applied to all inventories similar in nature.
Yes. Different cost formulas can be applied to inventory nature as long as the methods used are either FIFO or the weighted average cost.
7. In which of the following circumstances would an inventory write down be recognised or reversed?
When inventory is damaged or has become obsolete and can no longer be used
When prices of specific raw materials have declined but the prices of the related finished product remain above its cost to complete
When the selling price less the selling costs of a finished product (NRV) is less than its carrying value
When, at year-end, a company anticipates that market prices will recover for inventory that is currently carried at net realisable value
None of the above
8. You are having a debate with the assistant about certain costs that can be included in the cost of inventories, as he is unsure of which ones specifically. What would you tell him could be included?
Storage costs of material to be used in production
Transportation costs to move inventory from one retail store to another
Depreciation and maintenance of production equipment
Interest expense incurred during the production period of inventory
Abnormal production costs
9. You are mentoring trainee accountants. You asked them to write a number of statements about IAS 2. Which have they got correct?
Upon the sale of inventory an entity must recognise an expense for the carrying amount of the inventory
Inventories can be allocated to other asset accounts
The amount of any write-down of inventory should be deferred and amortised
LIFO can be used as a cost formula to measure inventory in IAS 2
Allocation of fixed overhead to inventory is adjusted using the level of production as a basis
Unallocated overheads are deferred so they can be allocated in future periods
10. Why is WIP arising out of construction contracts outside the scope of IAS 2?
WIP arising out of construction contracts are not inventory
There is a specific standard dealing with WIP arising out of construction contracts (IAS 11)
Contract costs may fall into different accounting periods.