The Multiple Choice Questions Blog

Management should compare the cost and net realisable value for each item of inventory.

Which ONE of the following circumstances could result in net realisable value being HIGHER than cost?

Select ONE answer:

1. An increase in the cost of raw materials, which cannot be passed on to the customer
2. Trade discounts from suppliers
3. Errors in production
4. An increase in production overheads

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct – Trade discounts from suppliers would REDUCE cost
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

Management should compare the cost and net realisable value for each item of inventory.

Which ONE of the following circumstances could result in net realisable value being HIGHER than cost?

Select ONE answer:

1. An increase in selling price
2. An increase in the cost of raw materials which cannot be passed on to the customer
3. Errors in production
4. An increase in production overheads

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct – An increase in selling price increases net realisable value.
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

For the following statement concerning perpetual inventory counts, select whether it is true, false, it depends on the size of the business, or it should be referred to a more senior auditor for comment.

• Material differences between book inventory and actual inventory must be investigated and corrected.

Select ONE answer:

1. Consult a senior colleague
2. Depends on the size of the business
3. False
4. True

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

For the following statement concerning perpetual inventory counts, select whether it is true, false, it depends on the size of the business, or it should be referred to a more senior auditor for comment.

• All inventory lines must be counted at least once per month.

Select ONE answer:

1. Consult a senior colleague
2. Depends on the size of the business
3. False
4. True

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct – All inventory lines must be counted at least once per year, not once per month.
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

For the following statement concerning perpetual inventory counts, select whether it is true, false, it depends on the size of the business, or it should be referred to a more senior auditor for comment.

• Adequate inventory records must be kept up to date.

Select ONE answer:

1. False
2. True
3. Consult a senior colleague
4. Depends on the size of the business

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.