It is not enough to just read and gather information, you should also test yourself and measure how much you've learned. Anyways, here are some of the simple review questions based on IAS 1 Presentation of FS and IAS 2 Inventories. This are just a few questions based on those accounting standards.
1. Which of the following is NOT an attribute of relevance?
a. Predictive value
b. Feedback value
c. Timeliness
d. Neutrality
2. Whenever there is a conflict between the economic substance of a certain transaction and its legal form, what shall prevail is the economic substance. What concept is this?
a. Form over substance
b. Substance over form
c. Faithful presentation
d. Completeness
3. Inventories are accounted for by applying the lower of cost or net realizable value. This is in accordance of what concept?
a. Materiality
b. Conservatism
c. Consistency
d. Comparability
4. Objectivity is assumed to be achieved when an accounting transaction
a. Is recorded in a fixed amount of pesos
b. Involves the payment or receipt of cash
c. Involves an arm's length transaction between two independent parties
d. Allocates revenue or expenses in a rational and systematic manner
5.Which of the following is most likely to prepare the most accurate financial forecast for a corporate entity based on empirical evidence?
a. Investors using statistical models to generate forecasts
b. corporate management
c. Financial analysts
d. Independent certified public accountants
6. The cost of inventories includes purchase price and all other costs that are incurred in bringing the inventories to their present location and condition are capitalized as cost of inventories and these include
a. cost of designing products for specific customers
b. abnormal amount of wasted material, labor and production cost
c. selling cost
d. storage cost not necessary in the production process before a further production stage
7.What is Net realizable value?
a. Estimated selling price
b. current replacement cost
c. Estimated selling price less estimated cost to complete
d. Estimated selling price less estimated cost to complete and estimated cost to sell.
8.Inventories of a service provider may simply be described as
a. work in progress
b. unbilled services
c. billed services
d. services inventory
9. Which of the following would not be reported as inventory?
a. Land acquired for resale by a real estate firm
b. Shares and bonds held for resale by a brokerage firm
c. Partially completed goods held by a manufacturing company
d. Machinery acquired by a manufacturing company for the use in the production process
10.Theoretically, cash discounts permitted on purchased raw materials should be
a. Added to other income, whether taken or not
b. Added to other income, only if taken
c. Deducted from inventory, whether taken or not
d. Deducted from inventory, only if taken
Answers:
1. d
2. b
3. b
4. c- An arms's length transaction is a transaction between two independent parties and therefore objective
5. b
6. a
7. d
8. a
9. d
10.c
SOURCE: (Source: Theory of Accounts by Conrado Valix, AICPA Adapted)
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Showing posts with label IAS 2. Show all posts
Showing posts with label IAS 2. Show all posts
Wednesday, August 6, 2008
Sunday, August 3, 2008
IAS 2 Inventories
Technical Summary
This extract has been prepared by IASC Foundation staff and has not been approved by the IASB.For the requirements reference must be made to International Financial Reporting Standards.
IAS 2 Inventories
OBJECTIVE: To prescribe the accounting treatment for inventories. A primary issue in accounting for inventories is the amount of cost to be recognised as an asset and carried forward until the related revenues are recognised. This Standard provides guidance on the determination of cost and its subsequent recognition as an expense, including any write-down to net realisable value. It also provides guidance on the cost formulas that are used to assign costs to inventories.
MEASUREMENT OF INVENTORIES: Lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
COMPOSITION OF COST OF INVENTORIES:
A. costs of purchase
B. costs of conversion
C. other costs incurred in bringing the inventories to their present location and condition.
The cost of inventories shall be assigned by using the first-in, first-out (FIFO) or weighted average cost formula. An entity shall use the same cost formula for all inventories having a similar nature and use to the entity. For inventories with a different nature or use, different cost formulas may be justified. However, the cost of inventories of items that are not ordinarily interchangeable and goods or services produced and segregated for specific projects shall be assigned by using specific identification of their individual costs.
When inventories are sold, the carrying amount of those inventories shall be recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories shall be recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, shall be recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.
SOURCE: International Accounting Standards Board
This extract has been prepared by IASC Foundation staff and has not been approved by the IASB.For the requirements reference must be made to International Financial Reporting Standards.
IAS 2 Inventories
OBJECTIVE: To prescribe the accounting treatment for inventories. A primary issue in accounting for inventories is the amount of cost to be recognised as an asset and carried forward until the related revenues are recognised. This Standard provides guidance on the determination of cost and its subsequent recognition as an expense, including any write-down to net realisable value. It also provides guidance on the cost formulas that are used to assign costs to inventories.
MEASUREMENT OF INVENTORIES: Lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
COMPOSITION OF COST OF INVENTORIES:
A. costs of purchase
B. costs of conversion
C. other costs incurred in bringing the inventories to their present location and condition.
The cost of inventories shall be assigned by using the first-in, first-out (FIFO) or weighted average cost formula. An entity shall use the same cost formula for all inventories having a similar nature and use to the entity. For inventories with a different nature or use, different cost formulas may be justified. However, the cost of inventories of items that are not ordinarily interchangeable and goods or services produced and segregated for specific projects shall be assigned by using specific identification of their individual costs.
When inventories are sold, the carrying amount of those inventories shall be recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories shall be recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, shall be recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.
SOURCE: International Accounting Standards Board
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