CFAS - Chapter 10: PAS 10 - Inventories

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1. Abnormal cost of cost are excluded from the cost of 16. FIFO accordance with the ordinary merchandising
wasted materials inventories and recognized as expenses procedure that the goods are sold in the
Storage cost in the period when incurred: order they are purchased
Administrative
17. FIFO this method favors the statement of financial
overheads
position in that the inventory is stated at
Distribution or
current replacement cost
selling costs
18. Finished The inventories of a manufacturing concern
2. Allowance method the writendown of inventory to net
Goods are:
realizable value is accounted for using
Goods in
____________________
process
3. average unit cost computed by dividing the total cost of Raw materials
goods available for sale by the total Factory or
number of units available for sale manufacturing
supplies
4. Capitalized storage cost on goods in process are
_____________ 19. Finished Inventories encompass that awaiting use in
goods the production process
5. Cost is lower than if the _________________________, there is no
produced
realizable value accounting problem because the
Goods in
inventory is stated at cost and the
process
increase in value is not recognized
Materials and
6. Cost of conversion includes cost directly related to the supplies
units of production such as direct labor
20. Fixed indirect cost of production that remains
7. Cost of conversion it also includes a systematic allocation production relatively constant regardless of the volume
of fixed and variable production overhead of production
overhead that is incurred in converting
21. Goods Inventories encompass
materials into finished goods.
purchased Example:
8. Cost of purchase comprise the purchase price, import Held for a. Merchandise purchased by a retailer and
duties and irrecoverable taxes, freight, resale held for resale
handling and other costs directly b. Land and other property held for resale
attributable to the acquisition of by a subdivision entity and real estate
finished goods, materials and services. developer
9. Cost of purchase 3 Cost of inventories 22. inflation/rising the FIFO method would result to the highest
Cost of conversion prices net income
Other cost
23. Inventories held for sale in the ordinary course for
10. declining prices the LIFO method would result to the business
highest net income.
11. deflation/declining the FIFO method would result to the process of production for such sales or in
prices lowest net income the form of materials

12. Examples of Fixed Depreciation

supplies to be consumed in the production
production Maintenance of factory building and
process
overhead equipment
Cost of factory management and
rendering services
administration
24. LIFO this method favors the income statement
13. Examples of indirect labor
because there is a matching of current cost
Variable indirect materials
against current revenue, the cost of goods
production
sold being expressed in terms of current or
overhead
recent cost
14. Expensed storage cost on finished goods are
25. LIFO the goods last purchased are first sold
____________________
15. FIFO the goods first purchased are first sold
26. Lower of cost and net inventories shall be measured at the ________________
realizable value (LCNRV)
27. Manufacturing Concern one that buys goods which are altered or converted into another form before they are made available
for sale.
28. Merchandise inventory generally applied to goods held by a trading concern
29. Net realizable value is if the ____________________________, the inventory is measured at net realizable value
lower than cost
30. Net Realizable Value estimated selling price in the ordinary course of business less the estimated cost of completion and
(NRV) the estimated cost of disposal
31. Other cost included in the cost of inventories only the extent that it is incurred in bringing the inventories to their
present location and condition
32. rising prices the LIFO method would result to the lowest net income.
33. Specific Identification specific costs are attributed to identified items of inventory
34. Specific Identification this method is appropriate for inventories that are segregated for a specific project and inventories that
are not ordinarily interchangeable.
35. Trading Concern one that buys and sells goods in the same form purchased
36. Trading Concern Inventories are classified into two namely
Manufacturing Concern
37. Variable production indirect cost of production that varies directly with the volume of production
overhead
38. Weighted average unit the cost of the beginning inventory plus the total cost of purchases during the period is divided by the
cost total units purchased plus those in the beginning inventory to get a ______________