FA - Inventory

An item of inventory was purchased for $500. It is expected to be sold for $1,200 although $250 will need to be spent on it in order to achieve the sale. To replace the same item of inventory would cost $650.

At what value should this item of inventory be included in the financial statements?

• $600

• $750

• $500

• $650

Closing inventory may be valued using first-in, first-out (FIFO) or average cost (AVCO).

Which of the following statements is true assuming that prices have fallen throughout the year?

• Closing inventory and profit are higher using FIFO rather than AVCO

• Closing inventory and profit are lower using FIFO rather than AVCO

• Closing inventory is higher and profit lower using FIFO rather than AVCO

• Closing inventory is lower and profit higher using FIFO rather than AVCO

Dylan performs an inventory count on 30 December 20X6 ahead of the 31 December year end. Dylan counts 1,200 identical units, each of which cost $50. On 31 December, Dylan sold 20 of the units for $48 each.

What figure should be included in Dylan's statement of financial position for inventory at 31 December 20X6?

• $56,640

• $45,670

• $55,870

• $45,890

Ki's interior design business received a delivery of fabric on 29 June 20X6 and was included in the inventory valuation at 30 June 20X6. As at 30 June 20X6, the invoice for the fabric had not been accounted for.

Based upon the available information, what effect(s) will this have on Ki's profit for the year ended 30 June 20X6 and the inventory valuation at that date?

1) Profit for the year ended 30 June 20X6 will be overstated.

2) Inventory at 30 June 20X6 will be understated.

3) Profit for the year ended 30 June 20X7 will be overstated.

4) Inventory at 30 June 20X6 will be overstated.

• 1 and 2

• 2 and 3

• 1 only

• 1 and 4

What journal entry is required to record goods taken from inventory by the owner of a business for personal use?

• Dr Drawings

  Cr Purchases

• Dr Sales Cr Drawings

• Dr Drawings Cr Inventory

• Dr Inventory Cr Drawings

Jay's annual inventory count took place on 7 July 20X6. The inventory value on this date was $38,950. During the period from 30 June 20X6 to 7 July 20X6, the following took place:

Sales $6,500

Purchases $4,250

The mark up is 25% on cost.

What is Jay's inventory valuation at 30 June 20X6?

• $39,900

• $49,800

• $67,600

• $55,500

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

Opening inventory at 1 January was 6 items valued at $15 each.

January Purchases 10 items at $19.80 each

February Sales 10 items at $30 each

March Purchases 20 items at $24.50

Sales 5 items at $30 each

• $155

• $265

• $780

• $670

Your business values inventory using the periodic 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.

What was the value of closing inventory at 31 October 20X8?

• $1110

• $1150

• $1170

• $1190

Wei is a book wholesaler. On each sale, commission of 4% is payable to the selling agent. The following information is available in respect of total inventories of three of the most popular titles at Wei's 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 value of these inventories in Wei's statement of financial position?

• $7,368

• $7,400

• $7,560

• $7,640

A business had inventory at 1 July comprising 15 units at a cost of $3.00 each. The following inventory movements occurred in July:

3 July 20X4 5 units sold at $3.30 each

8 July 20X4 10 units bought at $3.50 each

12 July 20X4 8 units sold at $4.00 each

What was the value of closing inventory at 31 July, if the FIFO method of inventory valuation is used?

• $31.50

• $36.00

• $39.00

• $41.00