INTACC - CHAPTER 11

Question 1

IFRS prohibits which cost flow assumption?

a. LIFO
b. Specific identification
c. Weighted average
d. Any of these cost flow assumptions is allowed

Answer 1

a. LIFO

Question 2

What is the inventory pricing procedure in which the oldest costs rarely have an effect on the ending inventory?

a. FIFO
b. LIFO
c. Specific identification
d. Weighted average

Answer 2

a. FIFO

Question 3

In a period of falling prices which inventory method generally provides the lowest amount of ending inventory?

a. Weighted average
b. FIFO
c. Moving average
d. Specific identification

Answer 3

b. FIFO

Question 4

Which inventory cost flow assumption would consistently result in the highest income in a period of rising prices or inflation?

a. FIFO
b. LIFO
c. Weighted average
d. Specific identification

Answer 4

a. FIFO

Question 5

The costing of inventory must be deferred until the end of reporting period under which of the following method of inventory valuation?

a. Moving average
b. Weighted average
c. LIFO perpetual
d. FIFO perpetual

Answer 5

b. Weighted average

Question 6

Cost of goods sold is the same under periodic system and perpetual system using

a. FIFO
b. LIFO
c. Weighted average
d. Specific identification

Answer 6

a. FIFO

Question 7

The cost of inventories that are not ordinarily interchangeable and goods produced and segregated for specific projects shall be measured using

a. FIFO
b. Average method
c. LIFO
d. Specific identification

Answer 7

d. Specific identification

Question 8

Which is the reason why the specific identification method may be considered ideal for assigning cost to inventory and cost of goods sold?

a. The potential for manipulation of net income is reduced.

b. There is no arbitrary allocation of cost.

c. The cost flow matches the physical flow.

d. It is applicable to all types of inventory.

Answer 8

c. The cost flow matches the physical flow.

Question 9

IFRS requires the specific identification method in certain circumstances. Which of the following is likely to be a circumstance where the specific identification method can be used?

a. Unit price is low.
b. Inventory turnover is low.
c. Inventory quantities are large.
d. All of the choices are likely circumstances.

Answer 9

b. Inventory turnover is low.

Question 10

Which cost flow assumption is used for inventory when an entity builds townhouses?

a. FIFO
b. Specific identification
c. Weighted average
d. Any of these cost flow assumptions

Answer 10

b. Specific identification