Practice Questions

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INVENTORY (Practice Questions)

1. An item of inventory was purchased for $500. It is expected to be sold for


$1200 although $250 will need to be spent on it in order to achieve the sale.
How should the inventory be valued in the accounts?
2. David performs an inventory count on 30 December 20X6 for the year ended
31 December. He counts 1200 identical units, each of which cost $50. On 31
December, David sold 20 of the units for $48 each. What figure should be
included in Davids balance sheet for inventory at the year end?
3. Percy Pilbeam is a book wholesaler. On each sale, commission (selling
expense) of 4% is payable to the selling agent. The following information is
available in respect of total inventories of three of his most popular titles at
his financial year-end:
Cost
($)
2280
4080
1280

Henry VII- Shakespear


Dissuasion Novels
John Bunion stories

Selling Price
($)
2900
4000
1300

Which is the total value of these inventories in Percys balance sheet?


4. S&Co sells three products: Basic, Super and Luxury. The following information
was available at the year end:

Original cost
Estimated Selling Price
Selling and Distribution Cost
Units in inventory

Basic
($ per
unit)
6
9
1
200 units

Super
($ per unit)
9
12
4
250 units

Luxury
($ per
unit)
18
15
5
150 units

What should be the value of closing inventory at the year end?


5. Traceys sells three products: A, B and Luxury. The following information was
available at the year end:

Original cost
Estimated Selling Price
Selling and Distribution Cost

A
($ per
unit)
7
15
2

B
($ per unit)
10
13
5

C
($ per
unit)
19
20
6

Units in inventory

20 units

25 units

15 units

What should be the value of closing inventory at the year end?


6. What would be the effect on a business profit, which has been calculated
including inventory at cost, of discovering that one of its inventory items
which cost $7500 has a NRV of $8500?
a). An increase of $8500, b). an increase of $1000, c). no effect at all
7. The closing inventory of X amounted to $116400 excluding the following two
inventory lines:
a. 400 items which had cost $4 each. All were sold after the balance
sheet date for $3 each with selling expense of $200 for the batch.
b. 200 different items which had cost #30 each. These items were found
to be defective at the balance sheet date. Rectification work after the
balance sheet date amounted to $1200, after which they were sold for
#35 each with selling expense totaling $300.
What would be the total figure should appear in the balance sheet of X for
inventory?

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