Inventories

Inventory is a/an _______________.

• current asset

• non-current asset

• current liability

• expense

State the valuation of inventory.

• Inventory is valued at cost plus net realisable value.

• Inventory is valued at higher of cost and net realisable value.

• Inventory is valued at net realisable value only.

• Inventory is valued at lower of cost and net realisable value.

On 1 July 2020, John had an inventory value of $1,000. A fire broke out and damaged goods costing $200. What was the value of the impairment loss on inventory?

• $1,000

• $200

• $1200

• $800

Cost of inventory = $5,000

Net realisable value = $7,000

What is the value of impairment loss on inventory?

• $0

• $2000

• $5000

• $7000

On 1 June 2020, ABC Trading has a inventory value of $1,000. On 30 June 2020, the net realisable value of the inventory is $890. Prepare the journal entry to adjust the inventory value.

• Dr Inventory $890

  Cr Impairment loss on inventory $890

• Dr Inventory $110

  Cr Impairment loss on inventory $110

• Dr Impairment loss on inventory $890

  Cr Inventory $890

• Dr Impairment loss on inventory $110

  Cr Inventory $110

Inventory are goods purchased from suppliers to sell to customers.

• True

• False

Impairment loss on inventory is a/an _________.

• expense

• liability

• asset

• income

Cost of inventory = $100

Net realisable value = $20

What is the value of impairment loss on inventory?

• $0

• $20

• $80

• $100

The valuation of inventory at the lower of cost and net realisable value is based on _________ theory.

• matching

• prudence

• objectivity

• historical cost

Given cost= $500, net realisable value = $300, the effect of not adjusting the inventory value on the statement of financial performance is ________.

• Overstate income, overstate profit.

• Understate expense, overstate profit

• Understate income, understate profit

• Overstate expense, understate profit