1.

The specific identification method can be used only:

a. In income tax returns

b. For financial reporting purposes (but not in income tax returns)
c. When the individual items in inventory are similar in terms of cost, function, and sales
value
d. When the actual acquisition costs of individual units can be determined from the
accounting records

2. Which of the following flow assumptions is not acceptable under PFRS 2?

a. First-in, first-out
b. Specific identification
c. Last-in, first-out
d. Average cost

3. 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

4. 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