Inventory Valuation

MULTIPLE CHOICE QUESTIONS

1. Which one out of the following is not an inventory valuation method?

A. FIFO
B. LIFO
C. Weighted Average
D. Economic Order Quantity (EOQ)

2. In Case of rising prices (inflation), FIFO method will:

A. provide lowest value of closing stock and profit
B. provide highest value of closing stock and profit
C. provide highest value of closing stock but lowest value of profit
D. provide highest value of profit but lowest value of closing stock

3. In Case of rising prices (inflation), LIFO method will:

A. provide lowest value of closing stock and profit
B. provide highest value of closing stock and profit
C. provide highest value of closing stock but lowest value of profit
D. provide highest value of profit but lowest value of closing stock

4. Regardless of how long it takes to produce and sell inventory, inventory is always considered to be a?
A. Current Asset
B. Fixed Asset
C. Long Term Asset
D. Current Liability

5. The latest cost of inventories is changed to production but the old prices are changed to inventories on
hand?
A. Average
B. FIFO
C. LIFO
D. Perpetual

6. Which type of inventory system is constantly updated inventory system?

A. Periodic
B. FIFO
C. LIFO
D. Perpetual

7. The inventories are recorded at the latest price but the production cost is changed old cost price?
A. Average
B. FIFO
C. LIFO
D. Perpetual

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 Inventory Valuation
8. During September, Khan had sales of 148,000, which made a gross profit of 40,000. Purchases amounted
to 100,000 and opening inventory was 34,000. The value of closing inventory was?
A. 24000
B. 26000
C. 42000
D. 54000

Q. 9, 10 and 11 will not be considered as MCQs, still options have been given for these questions. Prepare full
format and then solve the following three questions:
9. Calculate the value of closing stock from the following according to FIFO method:
01/01/2020 – Opening balance 50 units @ Rs. 4
Receipts:
05/01/2020 – 100 units @ Rs. 5
12/01/2020 – 200 units @ Rs. 4.50
Issues:
02/01/2020 – 30 units
18/01/2020 – 150 units
A. 765
B. 805
C. 786
D. 700

10. Calculate the value of closing stock from the following according to LIFO method:
01/01/2020 – Opening balance 50 units @ Rs. 4
Receipts:
05/01/2020 – 100 units @ Rs. 5
12/01/2020 – 200 units @ Rs. 4.50
Issues:
02/01/2020 – 30 units
18/01/2020 – 150 units
A. 765
B. 805
C. 786
D. 700

11. Calculate the value of closing stock from the following according to Weighted Average Method:
01/01/2020 – Opening balance 50 units @ Rs. 4
Receipts:
05/01/2020 – 100 units @ Rs. 5
12/01/2020 – 200 units @ Rs. 4.50
Issues:
02/01/2020 – 30 units
18/01/2020 – 150 units
A. 765
B. 805
C. 786
D. 700

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