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IAS – 2

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IAS – 2

Tishadz December 14, 2020

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Question 1 of 15

1. Question
1. Inventory should be stated at
- A. Lower of cost and fair value.
- B. Lower of cost and net realizable value.
- C. Lower of cost and nominal value.
- D. Lower of cost and net selling price.
- E. Choices b and d.
- F. Choices a and c.
- G. Choices a, b, and d.
Correct

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Question 2 of 15

2. Question
2. Which of the following costs of conversion cannot be included in cost of inventory?
- A. Cost of direct labor.
- B. Factory rent and utilities.
- C. Salaries of sales staff (sales department shares the building with factory supervisor).
- D. Factory overheads based on normal capacity.
Correct

Incorrect
Question 3 of 15

3. Question
3. Inventories are assets
- A. Used in the production or supply of goods and services for administrative purposes.
- B. Held for sale in the ordinary course of business.
- C. Held for long-term capital appreciation.
- D. In the process of production for such sale.
- E. In the form of materials or supplies to be consumed in the production process or the rendering of services.
- F. Choices b and d.
- G. Choices b, d, and e.
Correct

Incorrect
Question 4 of 15

4. Question
4. The cost of inventory should not include
- A. Purchase price.
- B. Import duties and other taxes.
- C. Abnormal amounts of wasted materials.
- D. Administrative overhead.
- E. Fixed and variable production overhead.
- F. Selling costs.
- G. Choices c, d, and f.
Correct

Incorrect
Question 5 of 15

5. Question
5. Inventories, are defined as:
- A. Assets being held for sale, being prepared for sale or materials to be used in the production process or provision of services
- B. Tangible goods lying in the store, which are not being sold
- C. Only tangible products being held for sale, being prepared for sale or materials to be used in the production process
Correct

Incorrect
Question 6 of 15

6. Question
6. Net realisable value is defined as:
- A. The estimated selling price, in the ordinary course of business, plus costs of completion, and less selling costs
- B. The estimated selling price, in the ordinary course of business, less costs of completion, and less selling costs
Correct

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Question 7 of 15

7. Question
7. The difference between Net Realisable Value and Fair Value is that:
- A. Fair value relies on the specific business of the firm that is the subject of the financial statements. Net Realisable value relates to the market, rather than to individual contracts
- B. Net realisable value relies on the specific business of the firm that is the subject of the financial statements. Fair value relates to the market, rather than to individual contracts
Correct

Incorrect
Question 8 of 15

8. Question
8. The cost of inventories:
- A. Comprises only the costs of production, and no costs of conversion or other costs incurred in bringing the inventories to their present location and condition
- B. Comprises all costs of production, costs of conversion, and other costs incurred in bringing the inventories to their present location and condition
Correct

Incorrect
Question 9 of 15

9. Question
9. The purchase price, transport and handling costs. Taxes and import duties are all examples of:
- A. Costs of conversion
- B. Neither
- C. Cost of purchase and costs of conversion, both
- D. Costs of purchase
Correct

Incorrect
Question 10 of 15

10. Question
10. Variable Production overheads are:
- A. Those direct and indirect costs that vary directly with different levels of production, such as direct and indirect labour
- B. Variable production overheads are those indirect costs that vary directly with different levels of production, such as indirect labour and indirect materials
Correct

Incorrect
Question 11 of 15

11. Question
11. How would unallocated overheads be recognised?
- A. Unallocated overheads are recognised as income in the income statement, in the period that they are incurred
- B. Unallocated overheads are recognised as an expense in the income statement, in the period that they are incurred
Correct

Incorrect
Question 12 of 15

12. Question
12. As opposed to fixed production overheads, variable production overheads are:
- A. Allocated to each unit of production, based on the actual usage of facilities
- B. Allocated to all the units of production, as one whole
Correct

Incorrect
Question 13 of 15

13. Question
13. The definition of “inventories” given by international standard IAS2 states that items qualify as inventories only if they are assets held for sale in the ordinary course of business or assets in the process of production for such sale. True or False?
- A. True
- B. False
Correct

Incorrect
Question 14 of 15

14. Question
14. Which of the following items cannot be included in the cost of inventories?
- A. Fixed production overheads
- B. The cost of abnormal wastage of materials and labour
- C. Variable production overheads
- D. Irrecoverable import duties payable on the acquisition of inventories
Correct

Incorrect
Question 15 of 15

15. Question
15. Which of the following items should be included in the cost of inventories?
- A. Conversion costs
- B. The cost of storing finished goods
- C. The cost of abnormal wastage of materials and labour
- D. Selling costs
Correct

Incorrect

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