Five ACC Multiple Choice Questions

1. According to IFRS, how should inventory be valued on the balance sheet?

A) Historical cost

B) Market value

C) At the price paid to get the inventory ready for sale

D) Lower of cost and net realizable value

2. In a period when inventory costs from the supplier are increasing, which of the following inventory flow assumptions will result in the highest net income?

A) FIFO

B) Cannot tell from the information provided

C) Net realizable value

D) Average cost

3. In a periodic inventory system, what type of entry is required to record the cost of sales?

A) An adjusting entry

B) A transactional entry

C) None of the other answers is correct - the cost of sales is not recorded in a periodic system

D) A closing entry

4. Which inventory system keeps a running total of purchases and sales of inventory with adjustments that reflect changes as they occur?

A) A just-in-time system

B) A perpetual system

C) A specific identification system

D) A periodic system

5. The use of the FIFO inventory flow assumptions means that:

A) there is the best matching of costs to the physical flow of goods.

B) the periodic inventory system must be used.

C) the ending inventory includes the oldest costs.

D) the oldest units are included in cost of sales.