Study Unit 2: Measurement, Valuation, and Disclosure Assets -- Short-Term

Items (2022) MCQ:

https://youtube.com/playlist?list=PLVveijVEWHUd84bV6KekBRG-JjjLeu-BX

https://www.facebook.com/102858977764705/posts/651728062877791/?sfnsn=scwspmo

https://t.me/joinchat/AAAAAEmdkQm8l_10mjxMXQ

Prepared by: Sameh.Y.El-lithy. CMA,CIA.

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 Study Unit 2: Measurement, Valuation, and Disclosure:
Investments and Short-Term Items
Subunit 3: (21) Inventory - Cost Flow Methods

Question: 1
https://youtu.be/wX0WJMD2GWo

The inventory method yielding the same inventory measurement and cost of goods sold whether a perpetual or
periodic system is used is

A. Average cost.

B. First-in, first-out.

C. Last-in, first-out.

D. Either first-in, first-out or last-in, first-out.

Question: 2
https://youtu.be/EEE9vISUhjI

An entity started in Year 1 with 200 scented candles on hand at a cost of $3.50 each. These candles sell for $7.00
each. The following schedule represents the purchases and sales of candles during Year 1:

Transaction Quantity Unit Quantity

Number Purchased Cost Sold

1 --- --- 150

2 250 $3.30 ---

3 --- --- 100

4 200 3.10 ---

5 --- --- 200

6 350 3.00 ---

7 --- --- 300

If the entity uses periodic FIFO inventory pricing, the gross profit for Year 1 would be

Prepared by: Sameh.Y.El-lithy. CMA,CIA.

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 A. $2,755

B. $2,805

C. $2,854

D. $2,920

Question: 3
https://youtu.be/S7QSztb6ym8

The cost of materials has risen steadily over the year. Which of the following methods of estimating the ending
balance of the materials inventory account will result in the highest profit, assuming all other variables remain
constant?

A. Last-in, first-out

(LIFO). B. First-in, first-

out (FIFO). C. Weighted

average.

D. Specific identification.

Question: 4
https://youtu.be/gEEc_j4l_6Q
When a right of return exists, an entity may recognize revenue from a sale of goods at the time of sale only if

A. The amount of future returns can be reliably estimated.

B. The seller retains the risks and rewards of ownership.

C. The buyer resells the goods.

D. The seller believes returns will not be material.

Prepared by: Sameh.Y.El-lithy. CMA,CIA.

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 Fact Pattern: Illustrated below is a perpetual inventory card for the current year.
Date Units Purchased Units Sold Units Balance
January 1 0
January 12 1,000 @ $2.00 1,000
March 15 300 700
May 5 500 @ $2.20 1,200
July 8 500 700
November 24 1,000 @ $1.65 1,700
Additional information:
• The entity had no opening inventory.
• The items sold on March 15 were purchased on January 12.
• The items sold on July 8 were purchased on May 5.

Question: 5
https://youtu.be/zZ6Og6Nxiik

The ending inventory balance under the first-in, first-out (FIFO) method of inventory valuation is

A. $3,050

B. $3,150

C. $3,230

D. $3,430

Fact Pattern: Illustrated below is a perpetual inventory card for the current year.
Date Units Purchased Units Sold Units Balance
January 1 0
January 12 1,000 @ $2.00 1,000
March 15 300 700
May 5 500 @ $2.20 1,200
July 8 500 700
November 24 1,000 @ $1.65 1,700
Additional information:
• The entity had no opening inventory.
• The items sold on March 15 were purchased on January 12.
• The items sold on July 8 were purchased on May 5.

Prepared by: Sameh.Y.El-lithy. CMA,CIA.

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 Question: 6
https://youtu.be/ybTEIz22UTQ

The cost of goods sold under the specific identification method of inventory valuation is

A. $1,320

B. $1,520

C. $1,600

D. $1,700

Question: 7
https://youtu.be/HJucnbFMWJ0

A merchandising company had the following inventory related transactions in its first year of operations:

Purchases Sales in Balance

Date in Units Units in Units

Jan. 1 10,000 @ $5 10,000

March 1 6,000 @ $6 16,000

May 1 3,000 13,000

July 1 8,000 @ $6.25 21,000

Sept. 1 12,000 9,000

Nov. 1 5,000 @ $7 14,000

Dec. 1 2,000 12,000

If the company uses the first-in-first-out (FIFO) method of inventory valuation, its ending inventory balance
(rounded) will be

A. $62,000

B. $70,759

C. $78,750

D. $84,000

Prepared by: Sameh.Y.El-lithy. CMA,CIA.

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 Question: 8
https://youtu.be/2-LCO0v1Y3s

Which of the following changes in accounting policies resulting from a significant change in
the expected pattern of economic benefit will increase profit?

A. A change from FIFO to LIFO inventory valuation when costs are rising.

B. A change from FIFO to weighted-average inventory valuation when costs are falling.

C. A change from accelerated to straight-line depreciation in the later years of the depreciable lives of the assets.

D. A change from straight-line to accelerated depreciation in the early years of the depreciable lives of the assets.

Question: 9
https://youtu.be/xL_h_DpTkLc

On January 1, a company has no opening inventory balance. The following purchases are
made during the year:

Units Unit
Purchased Cost
January 1 5,000 $10.00

April 1 5,000 9.00

July 1 5,000 8.00

October 1 5,000 7.50

There are 10,000 units in inventory on December 31.

If the company uses the last-in, first-out (LIFO) method of inventory valuation, cost of
goods sold for the year will be:

A. $77,500

B. $86,250

C. $87,500

D. $95,000
Prepared by: Sameh.Y.El-lithy. CMA,CIA.
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 Question: 10
https://youtu.be/LDyj_4OiLE8

The advantage of the last-in, first-out inventory method is based on the assumption that

A. The most recently incurred costs should be allocated to the cost of goods sold.

B. Costs should be charged to revenue in the order in which they are incurred.

C. Costs should be charged to cost of goods sold at average cost.

D. Current costs should be based on representative or normal conditions of efficiency and volume of operations

Question: 11
https://youtu.be/0Grg8XYFeIw

Which inventory cost flow method is prohibited according to IFRS?

A. First-in, first-out (FIFO) method.

B. Specific identification method.
C. Weighted average cost method.
D. Last-in, first-out (LIFO) method.

Question: 12
https://youtu.be/iocsB58UM2Y

In a period of rising prices, which one of the following inventory methods usually provides
the best matching of expenses against revenues?

A. Weighted average.
B. First-in, first-out.
C. Last-in, first-out.
D. Specific identification.

Prepared by: Sameh.Y.El-lithy. CMA,CIA.

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 Question: 13
https://youtu.be/zJz5VXgXtfQ

An entity has 8,000 units in inventory on January 1, valued at $10 per unit. During the year, the entity sold
25,000 units and purchased inventory as follows:

Quantity
Date Purchased Unit Price

April 1 15,000 units $8

July 1 10,000 units 9

October 1 12,500 units 10

If the entity uses the weighted-average method of inventory valuation, cost of goods sold for the period will be

A. $186,978

B. $197,000

C. $228,023

D. $235,000

Question: 14
https://youtu.be/vX_eqYPHyK4

Which inventory pricing method generally approximates current cost for each of the following?
Ending Cost of
Inventory Goods Sold

A. FIFO FIFO

B. LIFO FIFO

C. FIFO LIFO

D. LIFO LIFO

Prepared by: Sameh.Y.El-lithy. CMA,CIA.

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 Question: 15
https://youtu.be/E01h94F1MpQ

Which one of the following actions would result in a decrease in income?

A. Liquidating last-in, first-out layers of inventory when prices have been increasing.

B. Changing from first-in, first-out to last-in, first-out inventory method when prices are
decreasing.

C. Accelerating purchases at the end of the year when using last-in, first-out inventory method in
times of rising prices.

D. Changing the number of last-in, first-out pools.

Question: 16
https://youtu.be/9TN93RQy-rc
In periods of rising costs, which one of the following inventory cost flow assumptions will
result in higher cost of sales?

A. First-in, first-out.

B. Last-in, first-out.

C. Weighted average.

D. Moving average.

Prepared by: Sameh.Y.El-lithy. CMA,CIA.

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 Question: 17
https://youtu.be/lFwSzlk23fA
A retailer sells antique replica trunks to customers all over the world. The retailer’s inventory
records show the following:
Quantity (units) Cost (each)
Beginning inventory 200 $1,055
Purchases:
June 3 170 1,062
September 18 190 1,070
December 10 160 1,076
The retailer sells 470 units this year. Management is researching whether the company should
use last in, first out (LIFO) or first in, first out (FIFO). If the retailer’s management wants to
lower the company’s income taxes, which inventory cost flow assumption should it select?

A. FIFO, because the cost of goods sold will be $9,870 higher than LIFO.

B. FIFO, because the operating income will be $840 lower than LIFO.

C. LIFO, because the operating income will be $4,360 lower than FIFO.

D. LIFO, because the cost of goods sold will be $5,250 higher than FIFO.

Question: 18

https://youtu.be/Hwkf0Vi1ON8

Flex Co. uses a periodic inventory system. The following are inventory transactions for the
month of January:

1/1 Beginning inventory 10,000 units at $3

1/5 Purchase 5,000 units at $4

1/15 Purchase 5,000 units at $5

1/20 Sales at $10 per unit 10,000 units

Prepared by: Sameh.Y.El-lithy. CMA,CIA.
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 Flex uses the average pricing method to determine the value of its inventory. What amount
should Flex report as cost of goods sold on its income statement for the month of January?

A. $30,000

B. $37,500

C. $40,000

D. $100,000

Fact Pattern: During January, Metro Co., which maintains a perpetual inventory system, recorded the following
information pertaining to its inventory:
Units
Unit Total On
Units Cost Cost Hand

1,000 $1 $1,000 1,000

Purchased on 1/7 600 3 1,800 1,600

Sold on 1/20 900 700

Purchased on 1/25 400 5 2,000 1,100

Question: 19
https://youtu.be/Cb_zBt8Hufc

Under the moving-average method, what amount should Metro report as inventory at January 31?

A. $2,640

B. $3,225

C. $3,300

D. $3,900

Prepared by: Sameh.Y.El-lithy. CMA,CIA.

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 Question: 20
https://youtu.be/xdRoq0yC8JY

The weighted average for the year inventory cost flow method is applicable to which of the
following inventory systems?

Periodic Perpetual

A. Yes Yes

B. Yes No

C. No Yes

D. No No

Question: 21
https://youtu.be/WCCkaBDGbmk

On December 1, a company had 1,000 units in inventory valued at $787,500. On December 12,
the company purchased 2,000 units for $1,562,400. Sales of 2,400 units were made on December
23, and on December30, the company purchased another 2,000 units for $1,537,200. If the
company uses a periodic system and the weighted-average inventory valuation method, the
company’s December 31 balance sheet would report inventory of

A. $2,025,660

B. $2,021,292

C. $2,014,740

D. $2,007,180

Prepared by: Sameh.Y.El-lithy. CMA,CIA.

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