Question bank — IAS 2 — Inventories
168 questions in FR/EN/ES, scored by the real scoring engine.
Objective of the standard8 questions
- IAS 2 sets out the accounting treatment of inventories; the key question it addresses is the amount of cost to be kept as an asset until the revenue related to those inventories is recognised.True / falseL1
- IAS 2 deals only with determining the cost of inventories: the subsequent recognition of that cost as an expense, including write-downs to net realisable value, falls under other standards.True / falseL1
- The cost formulas used to assign the cost of inventories are not among the topics on which IAS 2 gives guidance.True / falseL1
- Write-downs of inventories to net realisable value are among the topics on which IAS 2 gives guidance.True / falseL1
- According to the objective of IAS 2, what is the primary issue in accounting for inventories?Single choiceL1
- Which set summarises the topics on which IAS 2 gives guidance?Single choiceL1
- A trainee at Ardenval claims that the objective of IAS 2 is to present inventories at their expected selling price. How should this be corrected?Single choiceL1
- According to the objective of IAS 2, until when is the cost of inventories carried as an asset?Single choiceL1
Scope and measurement exclusions12 questions
- Bonds that a manufacturing entity holds for resale are financial instruments: they are excluded from the scope of IAS 2.True / falseL1
- The young fir trees a nursery grows for sale as Christmas trees, which are biological assets related to its agricultural activity, are inventories within the scope of IAS 2.True / falseL1
- Ferrocourt, a commodity broker-trader in metals, measures its inventories at fair value less costs to sell. These inventories are entirely excluded from the scope of IAS 2.True / falseL2
- When a cereal producer measures its stored harvest at net realisable value in accordance with well-established practices in its industry, changes in that value are recognised in profit or loss in the period in which they occur.True / falseL2
- Which of these assets falls entirely within the scope of IAS 2?Single choiceL1
- Pomeraie grows apple trees and sells its apples. Which statement is correct regarding the scope of IAS 2?Single choiceL2
- Which items are entirely excluded from the scope of IAS 2? (several answers possible)Multiple choiceL1
- For which inventories are only the measurement requirements of IAS 2 set aside, the inventories remaining within the scope of the standard? (several answers possible)Multiple choiceL2
- Cupronor buys and sells copper on its own account. Its purchases aim at resale in the near future to generate a profit from price fluctuations, and it measures its inventories at fair value less costs to sell. At the reporting date, that value has increased by EUR 40,000 since acquisition. Which treatment applies under IAS 2?Single choiceL2
- The Silexmine group extracts zinc ore. Once extracted, the ore's sale is assured under a forward contract, and the group measures it at net realisable value, in accordance with a well-established practice in its industry. How are these inventories treated under IAS 2?Single choiceL2
- Under IAS 2, which feature distinguishes the inventories of a commodity broker-trader?Single choiceL2
- The Clos-Varenne estate farms its vines, harvests the grapes and turns them into wine, which it sells. Consider three items: the vines, the grapes at the point of harvest and the wine maturing in vats. Which allocation is correct?Single choiceL2
Inventories, net realisable value and fair value13 questions
- Raw materials that a bicycle manufacturer holds to be consumed in its production are inventories under IAS 2.True / falseL1
- Tornalis may classify as inventory a hydraulic press it has used in its workshops for several years, on the grounds that the press is used in production.True / falseL1
- The net realisable value of an inventory item is always equal to its fair value less costs to sell.True / falseL2
- To obtain net realisable value, an entity starts from the selling price it expects in the ordinary course of business and deducts the costs it still expects to incur to complete the item and to sell it.True / falseL1
- Land that a property developer holds for resale as part of its business is inventory.True / falseL1
- How does IAS 2 define net realisable value?Single choiceL1
- Distrimax, a distributor of electrical equipment, holds the following assets. Which one is not inventory?Single choiceL1
- Why can the net realisable value of an inventory item differ from its fair value less costs to sell?Single choiceL2
- Which of these items meet the definition of inventories? (several answers possible)Multiple choiceL1
- Which statements about net realisable value are correct? (several answers possible)Multiple choiceL2
- Torréfia holds a batch of green coffee. It plans to roast it and sell the resulting coffee to its own customers at an estimated price of EUR 31,000, after estimated costs of completion of EUR 4,500 and estimated selling costs of EUR 1,500. In the principal market for green coffee, an identical batch would be exchanged between market participants at EUR 22,800, with costs to sell of EUR 800. What is the net realisable value of the batch for Torréfia?Single choiceL2
- Logivia performs consulting engagements. To fulfil a contract with a customer, it incurs staff and travel costs; no goods are produced and no asset within the scope of another standard arises. The management controller proposes to recognise these costs as inventories under IAS 2. What should be the answer?Single choiceL2
- Netéclat provides industrial cleaning services. It holds detergents to be consumed during its jobs at customers' premises. How should these products be characterised under IAS 2?Single choiceL1
Lower of cost and net realisable value12 questions
- Under IAS 2, inventories are measured at the lower of cost and net realisable value.True / falseL1
- When the net realisable value of an inventory item exceeds its cost, the entity remeasures the item at its net realisable value and recognises a gain.True / falseL1
- Ombrelia holds a batch of parasols with a cost of EUR 800 and a net realisable value of EUR 950. At what amount is this batch included in inventories?Single choiceL1
- Vitralis is manufacturing a glass roof whose cost incurred at the reporting date amounts to EUR 1,200. Once completed, it can be sold for EUR 1,300; the remaining costs of completion are estimated at EUR 150 and the selling costs at EUR 50. At what amount is this glass roof in progress measured at the reporting date?Single choiceL2
- Which statements about the measurement of inventories under IAS 2 are correct? (several answers possible)Multiple choiceL2
- Menuisor makes custom staircases. At the reporting date, a staircase in progress has a cost incurred of …. Once completed, it will be sold for …; the estimated costs of completion amount to … and the estimated selling costs to …. Compute the net realisable value of the staircase and the amount at which it is measured in inventories.CalculationL2Variant
- The Sylvebois workshop is finishing a solid oak table intended for sale in its showroom. The accumulated cost of the table is …. Its expected selling price is …. Finishing costs of … (varnish and labour) remain to be incurred, and the sales agent will earn a commission of … on the sale. Determine the net realisable value and the amount of the table in inventories.CalculationL2Variant
- The Cyclarde shop bought an electric bicycle for …. At the reporting date, it expects to sell it for …, with delivery and the salesperson's commission amounting to …. No costs of completion are expected. Compute the net realisable value of the bicycle and its amount in inventories.CalculationL1Variant
- Domélec, a distributor of household appliances, holds three unrelated lots of goods at the reporting date; according to the facts of the case, no grouping is appropriate. Lot R: cost …, estimated selling price …, estimated selling costs …. Lot S: cost …, estimated selling price …, estimated selling costs …. Lot T: cost …, estimated selling price …, estimated selling costs …. No costs of completion are to be incurred. Compute the total amount of inventories at the reporting date and the total write-down.CalculationL3Variant
- The Aérotech group manufactures cabin equipment. At the reporting date, it holds a passenger seat in progress and a completed cabin panel, two separate items that the facts of the case do not allow to be grouped. Seat in progress: cost incurred …, estimated selling price once completed …, estimated costs of completion …, estimated selling costs …. Completed panel: cost …, estimated selling price …, estimated selling costs …. What is the total amount of these inventories in the statement of financial position, and what write-down must be recognised?CalculationL3Variant
- The wholesaler Rouelibre holds two models of city bicycles, each measured separately according to the facts of the case. Alto model: … units, unit cost …, estimated unit selling price …, estimated unit selling costs …. Brio model: … units, unit cost …, estimated unit selling price …, estimated unit selling costs …. Compute the total amount of the bicycles in inventories and the write-down to be recognised.CalculationL3Variant
- While reviewing Céramiq's inventories, you find that a batch of tiles with a cost of EUR 5,000 has been recorded at EUR 5,400, its net realisable value, the difference of EUR 400 having been recognised as income. Which conclusion should be drawn?Single choiceL3
Costs of purchase12 questions
- Trade discounts and rebates obtained from a supplier are deducted in determining the costs of purchase of the inventories bought.True / falseL1
- Ardoisine recovers from the tax authorities the VAT paid to its suppliers. It must nevertheless include that VAT in the costs of purchase of its merchandise inventories.True / falseL1
- Belvoir imports spare parts held for resale. Which of the following amounts forms part of the costs of purchase of these inventories?Single choiceL1
- Corvelle buys a batch of glassware held for resale. Which of the following items are included in the costs of purchase of the batch?Multiple choiceL2
- Ardelle, a tile wholesaler, buys a batch of floor tiles at a list price of …. The supplier grants a trade discount of …% on the invoice. Ardelle also pays a carrier … to deliver the batch to its warehouse. The VAT, which is recoverable, amounts to …. Compute the costs of purchase of the batch.CalculationL1Variant
- The coffee roaster Brévanne imports a container of green coffee. The invoiced purchase price is …. Brévanne pays non-recoverable customs duties of … and port handling costs of …. The supplier grants it a volume rebate of … on this container. Import VAT of … is fully recoverable. Compute the costs of purchase of the container.CalculationL2Variant
- Calvène, a distributor of electrical equipment, imports … motors at a unit list price of …, with a trade discount of …%. It bears freight of …, transit insurance of …, directly attributable to the acquisition, and non-recoverable customs duties of …. Recoverable VAT amounts to …. Finally, Calvène spends … on advertising to announce that the motors are on sale. Compute the total costs of purchase of the batch and the unit cost.CalculationL3Variant
- Dunelle, which buys materials and manufactures furniture, must determine the cost of its inventories. Which statement correctly describes the components of that cost?Single choiceL2
- Dorvelle, a bicycle retailer, receives a batch of bicycles held for resale. The supplier's invoice, payable in 30 days, shows a price excluding tax of …, with no discount or additional costs, and VAT of …, which Dorvelle recovers from the tax authorities. Record the entry for the receipt into inventory.Journal entryL1Variant
- The industrial paper merchant Estrelle buys paper reels to resell them as they are. The invoice, payable on credit, shows a list price of …, a trade discount of …% and recharged delivery costs of …. The VAT of … is recoverable. Record the entry for the receipt into inventory.Journal entryL2Variant
- Fenouillet, a fabric wholesaler, receives an invoice showing a price net of discount of 50,000 and recoverable VAT of 10,000. Its accountant records: debit Inventories 60,000, credit Trade payable 60,000. What is the error?Single choiceL2
- The cooperative Gaudrette buys 5,000 bags of fertiliser at 30 each, that is 150,000 excluding tax. The contract provides for a rebate of 6,000 on this batch, earned upon delivery, and transport to its silos costs 4,500. Its controller computes a unit cost of 30.90, that is (150,000 + 4,500) / 5,000. What is the error?Single choiceL3
Costs of conversion and allocation of production overheads13 questions
- At Harlan, depreciation of the factory machinery is a fixed production overhead, which forms part of the costs of conversion of the inventories produced.True / falseL2
- Iseran produced significantly less than its normal capacity this year. It must increase the amount of fixed production overhead allocated to each unit so that all of these overheads are included in its inventories.True / falseL2
- Which of the following costs of Jouvence's factory is a variable production overhead?Single choiceL2
- Kalimba, a manufacturer of seasonal toys, documents its method of allocating production overheads. Which statements comply with IAS 2?Multiple choiceL3
- Fermine manufactures wooden pallets. Its fixed production overheads for the year amount to …. Its normal capacity, estimated by management from the average production expected over several years, is … pallets. Following a drop in orders, it produced only … pallets, an abnormally low level of production. Compute the fixed overheads included in the cost of the pallets produced and the unallocated fixed overheads.CalculationL2Variant
- The foundry Gravelin produces castings. For each casting, materials cost … and direct labour …. Variable production overheads for the period amount to … and fixed overheads to …. The normal capacity used by Gravelin is … castings; a prolonged shutdown of a furnace limited actual production to … castings, a level considered abnormally low. Compute the unit production cost of the castings and the amount of unallocated fixed overheads.CalculationL3Variant
- The brickworks Hautmont incurs … of fixed production overheads for the year. Its normal capacity is … pallets of bricks. An exceptional order for a major construction project raised production to … pallets, an abnormally high level. All pallets produced are in inventory at the reporting date. Compute the fixed overhead to be allocated to each pallet.CalculationL3Variant
- The bottle manufacturer Ivrelle worked overtime all year to meet exceptional demand. It produced … cases, whereas its normal capacity is … cases, a level management considers abnormally high. Per case, materials cost …, direct labour … and variable overheads, allocated on the actual use of the facilities, …. Fixed production overheads for the year amount to …. Compute the fixed overhead per case and the unit production cost.CalculationL3Variant
- Jorvane records its costs by nature in a production costs account. This month, it recorded there … of direct costs (materials and direct labour), … of variable production overheads and … of fixed overheads. Its monthly normal capacity is … units; a breakdown limited production to … units, a level considered abnormally low, all in inventory at the end of the month. Record the entry capitalising the production costs in inventories, showing the unallocated fixed overheads separately.Journal entryL2Variant
- The electric bicycle manufacturer Kervel keeps its accounts by nature. For the quarter, its production cost accounts show … of materials and direct labour, … of variable overheads and … of fixed overheads (depreciation of the lines, factory supervision). A battery shortage reduced production, to a level considered abnormally low, to … bicycles, whereas the quarterly normal capacity, based on the average of previous quarters, is … bicycles. No bicycle has been sold yet. Record the quarter-end entry transferring the production costs to inventories.Journal entryL3Variant
- Lavéra processes an ore from which a single process simultaneously extracts two joint products, Alpha and Beta; the costs of conversion of each product are not separately identifiable. The joint costs up to the split-off point amount to 600,000. At the split-off point, Lavéra obtains 4,000 tonnes of Alpha, saleable at 150 per tonne, and 6,000 tonnes of Beta, saleable at 50 per tonne. Its accounting policy, applied consistently, allocates the joint costs on the basis of the relative sales value at the split-off point. What cost is allocated to the Alpha inventory?Single choiceL3
- The cheese maker Mirandol produces … cheese wheels, its main product; the same process generates whey, an immaterial by-product. The process costs for the period amount to …, of which … relates to milk lost following a refrigeration failure, a loss considered abnormal. Mirandol measures the whey at its net realisable value, estimated at …, and deducts that amount from the cost of the main product. Compute the total cost of the cheese wheels and their unit cost.CalculationL4
- Noirmont incurs 400,000 of fixed production overheads. Its normal capacity is 80,000 units, but a prolonged shutdown of a line due to a breakdown limited production to 50,000 units, an abnormally low level. The management controller included all fixed overheads in the cost of the units produced, at 8 per unit. What is the error?Single choiceL3
Other and excluded costs, borrowing costs, deferred settlement14 questions
- The commissions paid to Ombreval's sales staff to sell its finished goods are included in the cost of these inventories.True / falseL1
- At Palmyre, an incorrect press setting caused an abnormal loss of materials. The cost of this loss is recognised as an expense in the period and not included in the cost of inventories.True / falseL1
- To know whether borrowing costs may be included in the cost of its inventories, Quimperlé must refer to IAS 23, which identifies the limited circumstances in which they are included.True / falseL2
- The cheese maker Quérigny ripens its cheeses in a cellar; according to its process, ripening is a necessary stage of production, before the final packaging stage. Once packaged, the cheeses are kept in a refrigerated warehouse until they are sold. How should these two storage costs be treated?Single choiceL1
- Rosmarin manufactures packaging machines. For an order from a particular customer, its engineers design a bespoke machine, which is in production at the reporting date. Which of the following costs may it be appropriate to include in the cost of this inventory item?Single choiceL2
- Sorbier manufactures cosmetics. Which of the following costs must be recognised as expenses in the period rather than included in the cost of its inventories?Multiple choiceL2
- On 1 January 20X1, Nolvène buys an inventory of steel sheets. The supplier charges a price of … for settlement on normal credit terms; Nolvène obtains the right to pay … on 31 December 20X1. This deferral effectively contains a financing element. Compute the cost of the steel sheets and the interest expense to be recognised over the period of the financing.CalculationL2Variant
- Orbelle, a hardware wholesaler, buys … drills. For cash or at 30 days, the supplier's normal credit terms, each drill costs …. Orbelle chooses an offer of a single payment of … in … months, which effectively contains a financing element. Compute the cost of the drills to be recognised in inventory and the financing element to be recognised as interest expense over the period of the financing.CalculationL3Variant
- On 1 March 20X1, Pellan buys reels of cable. The price for settlement on normal credit terms is …; Pellan obtains the right to pay … on 31 August 20X1, a deferral that effectively contains a financing element. The reporting period ends on 31 December 20X1. Ignoring VAT and the final settlement, record the entry for the receipt into inventory and the entry for the interest expense of the period.Journal entryL2Variant
- On 1 February 20X2, Quintal, a boiler manufacturer, buys copper tubes. The supplier offers a price of … on its normal credit terms, or a settlement of … on 31 October 20X2, the option chosen by Quintal, which effectively contains a financing element. Quintal pays a carrier … in cash to deliver the tubes to its factory. The reporting period ends on 31 December 20X2. Ignoring VAT and the settlement of the supplier, record the entry for the receipt into inventory and the entry for the interest expense of the period.Journal entryL3Variant
- Tavernay manufactures garden furniture. At the reporting date, the carrying amount of its finished goods inventory, 300,000, includes 18,000 of rent for the warehouse where the finished furniture awaits sale. What is the error?Single choiceL2
- Ulmière buys spare parts, payable 110,000 in 24 months; the supplier's price for settlement on normal credit terms is 100,000. The deferral effectively contains a financing element. Ulmière recognises the inventory at 110,000. What is the error?Single choiceL3
- Rivaldi manufactures, for a particular hotel, a set of furniture designed specifically for it; the order is in progress at the reporting date. Costs incurred: materials used 40,000; direct labour 25,000; production overheads allocated 15,000; design of the furniture for this hotel 6,000; wood wasted through a faulty setting, a loss considered abnormal, 3,000; commercial presentation to other hoteliers 2,000; storage of finished pieces not necessary for the rest of the manufacturing 1,000. Rivaldi considers that these design costs help bring the order to its present condition. What is the cost of the inventory at the reporting date?Single choiceL2
- Sorlan incurs two administrative costs: 90,000 for the management and administration team of its factory, and 140,000 for the group finance department, which plays no part in production. How should these costs be treated in measuring inventories?Single choiceL2
Agricultural produce harvested from biological assets3 questions
- Vergers du Lac harvests apples from its own orchards and classifies them as inventories pending their sale. On initial recognition, the apples are measured at their fair value less costs to sell at the point of harvest, and that amount is their cost for the purposes of IAS 2.True / falseL2
- Agricole des Trois Chênes harvests wheat from its own crops on 20 July 20X1 and stores it in a silo pending its sale. At the point of harvest, the fair value of the wheat less costs to sell amounts to 80,000. At 31 December 20X1, that same amount would be 95,000 because market prices have risen. The entity applies the measurement requirements of IAS 2 to this inventory (case data). Which amount is the cost of the wheat under IAS 2?Single choiceL2
- Oliveraies de Montbrun harvests olives from its own trees and classifies them as inventories. At the point of harvest, the fair value of the harvested olives, determined under IAS 41, is 52,000 and costs to sell are estimated at 3,000. Cultivation costs incurred during the season amount to 31,000. At what amount do the olives enter inventories?Single choiceL2
Standard cost and retail methods8 questions
- Plasturgie du Vercors measures its finished goods using the standard cost method. This technique is permitted for convenience if its results approximate cost, and the standards must be regularly reviewed and revised where necessary.True / falseL2
- Ferronnerie Valmont sets standard costs for its steel gates, which it uses to measure its finished goods inventories. On what basis must those standards be set?Single choiceL2
- Comptoirs Sauvelin, a chain of convenience stores, is considering measuring its inventories using the retail method. Which statements are correct?Multiple choiceL2
- The DIY store Bazar Ondine applies the retail method to its tools department, whose items turn over quickly and have similar margins. At 31 December 20X1, the counted inventory is valued at … at the displayed selling prices. The appropriate gross margin percentage of the department, which takes into account items marked down, is … of the selling price (case data). The method is assumed to give a result that approximates cost. Calculate the cost of the department's inventory.CalculationL2Variant
- The bookshop and stationer Hespéride measures the inventory of its school supplies department, made up of many fast-moving items with comparable margins, using the retail method. The year-end physical count, taken at selling prices, totals …. Management has determined for this department a gross margin rate of … of the selling price, markdowns included. Assuming that this technique gives a reliable approximation of cost, what is the cost of the school supplies inventory?CalculationL2Variant
- Galeries Morvane applies the retail method department by department. At 31 December 20X1, the inventory of the delicatessen department is valued at … at selling prices, with an appropriate gross margin percentage of …; that of the perfume department is valued at …, with a percentage of …. These percentages, determined by the entity, take markdowns into account. The average margin of the whole store is 38%. Calculate the cost of each department's inventory and the total cost.CalculationL3Variant
- The home decoration retailer Maison Tilleul measures its inventories using the retail method. Its management accountant proposes applying a single margin rate to the whole inventory; however, the household linen department earns a gross margin of … and the tableware department a margin of …, these rates taking markdowns into account. Year-end inventory represents … of sales value for linen and … for tableware. Determine the cost of each department's inventory, then the total cost, applying to each its own percentage.CalculationL3Variant
- Atelier Corbières measures its furniture inventory using the standard cost method. The standards have not been reviewed for three years; in the meantime, timber prices have risen by 25% on a lasting basis. At the reporting date, the furniture in inventory amounts to 410,000 at standard cost, whereas its estimated actual cost, under current normal conditions, is 520,000. What should the entity do?Single choiceL2
Specific identification of costs8 questions
- The cost of inventory items that are not ordinarily interchangeable is assigned by specific identification of their individual costs.True / falseL1
- For which of these inventories must cost be assigned by specific identification?Single choiceL1
- Chantiers Navals d'Iroise is considering the specific identification of costs. Which statements are correct?Multiple choiceL2
- Automobiles Ardoise sells used vehicles, each identified by its serial number and acquired at a price negotiated individually with private sellers. To simplify inventory record-keeping, its finance director proposes measuring all vehicles at weighted average cost. Which position should be taken?Single choiceL2
- Quincaillerie Bastide holds 2 million identical bolts bought at different prices during the year. It may apply specific identification and designate as sold the batches bought at the lowest price in order to improve its profit.True / falseL2
- Helioterra buys 500 standard solar panels. On receipt, 120 of them are labelled and segregated in an area reserved for the construction of a solar plant ordered by a specific customer; the other 380 join the general inventory, where they are mixed with previous deliveries. How should the cost of these panels be assigned?Single choiceL2
- Bijouterie Saint-Amand holds unique pieces made by designers, each acquired at its own price, as well as standard silver chains bought by the thousand at varying prices. Which approach to assigning cost complies with IAS 2?Single choiceL2
- Why is specific identification inappropriate for an inventory comprising a large number of items that are ordinarily interchangeable?Single choiceL1
FIFO and weighted average cost formulas12 questions
- An entity may assign the cost of its interchangeable inventories using the last-in, first-out (LIFO) method, provided it applies it consistently.True / falseL1
- Épices Marivel applies first-in, first-out (FIFO). What does the cost of its closing inventory correspond to?Single choiceL1
- Alvéa Distribution is reviewing the cost formulas for its inventories. Which statements are correct?Multiple choiceL2
- Papeteries Lorvel measures its reams of paper using first-in, first-out (FIFO). For March 20X1: opening inventory of … reams at a unit cost of …; purchase of … reams at a unit cost of …; sales of … reams. Calculate the cost of sales for the month and the cost of closing inventory.CalculationL1Variant
- The lubricant distributor Hydrovane tracks its drums of industrial oil on a FIFO basis. It held … drums at … each at the start of 20X1, received … at … in March and then … at … in September, and sold … over the year. What is the cost of the drums sold and that of the drums remaining in inventory at the reporting date?CalculationL2Variant
- The trader Cafés Torrélia resells green coffee in bags and applies weighted average cost, calculated over the whole period. For 20X1: opening inventory of … bags at … per bag; purchases of … bags at … per bag; sales of … bags. Calculate the weighted average unit cost, the cost of sales and the cost of closing inventory.CalculationL2Variant
- Jardins Elvire, a wholesaler of garden furniture, assigns the cost of its garden sets using an annual weighted average. At 1 January 20X1, it held … sets valued at … each; it bought … at … in April and … at … in October. Deliveries to customers during the year cover … sets. Determine the average unit cost for the year, the cost of the sets sold and the value of inventory at 31 December 20X1.CalculationL2Variant
- Optique Brévalan keeps a perpetual inventory of its progressive lenses and recalculates weighted average cost at each new receipt. Movements for the quarter, in order: opening inventory of … units at …; purchase of … units at …; sale of … units; purchase of … units at …; sale of … units. Calculate the cost of sales for the quarter and the cost of closing inventory.CalculationL3
- Céramiques Ondaine resells earthenware tiles and applies weighted average cost calculated over the period. For 20X1: opening inventory of … boxes at …; purchases of … boxes at …; sales of … boxes. Revenue has already been recognised. Record the entry recognising the cost of sales for the year.Journal entryL2Variant
- The building materials trader Saint-Clar Bâtiment measures its concrete blocks using FIFO. During the quarter, it sold … blocks; at the start of the quarter it held … blocks valued at … each and it bought … at … each. The sales have already been recorded as revenue. Which entry recognises the cost of the blocks sold?Journal entryL2Variant
- The accountant of Verrerie Ambrine, which applies FIFO, calculated the cost of sales for the month as follows: opening inventory of 1,000 bottles at 6, purchase of 1,000 bottles at 8, sales of 1,200 bottles; cost of sales used = 1,000 × 8 + 200 × 6 = 9,200. What error did he make?Single choiceL2
- Nordelia distributes identical spare parts, intended for the same use, from two warehouses: one in Lyon, the other in its Seville branch. The Lyon accounting department applies FIFO; the Seville one applies weighted average cost, considered more advantageous under local tax rules. What conclusion should be drawn for Nordelia's financial statements?Single choiceL2
Write-down to net realisable value13 questions
- The cost of inventories that are damaged or have become obsolete may not be recoverable; those inventories are then written down to net realisable value.True / falseL1
- Which idea underlies writing inventories down to net realisable value?Single choiceL1
- Jouets Pimprenelle is preparing its year-end. Which of the following situations may make the cost of its inventories not recoverable?Multiple choiceL1
- Horlogerie Vasselin holds a batch of watches from a past collection, with a cost of …. Their estimated selling price in the ordinary course of business is …, and the estimated costs necessary to make the sale (resellers' commissions) amount to …. Calculate the net realisable value of the batch and the amount of the write-down.CalculationL1Variant
- At the reporting date, Charpentes Valdor holds a steel frame in the course of production, on which costs of … have been incurred. Once completed, it is expected to be sold for …. Estimated costs of completion of … remain to be incurred, and delivery and installation at the customer's site, borne by Valdor, will cost …. Determine the net realisable value of the work in progress and any write-down.CalculationL2Variant
- At the reporting date, Sports Altitude holds three unrelated items that do not meet the conditions for grouping (case data): skis (cost …, net realisable value …), tents (cost …, net realisable value …) and GPS watches (cost …, net realisable value …). Calculate the total write-down and the carrying amount of the three items after the write-down.CalculationL2Variant
- Atelier Brunhilde manufactures furniture. At the reporting date, its inventories comprise three distinct, unrelated products. Finished lamps: cost …, estimated selling price …, selling costs …. Finished tables: cost …, estimated selling price …, selling costs …. Sideboards in progress: cost incurred …, estimated selling price once completed …, costs of completion …, selling costs …. Calculate the total write-down and the total carrying amount of these inventories.CalculationL3Variant
- At the reporting date, Lunetterie Opaline holds frames from a collection that has become obsolete, with a cost of …. Their net realisable value, estimated from clearance prices, is …. Record the write-down entry.Journal entryL2Variant
- At the reporting date, Cycles Arvelle holds electric bikes of a superseded model, with a cost of …, an estimated selling price of … and estimated costs necessary to make the sale of …. It also holds accessories unrelated to this model, with a cost of … and a net realisable value of …. The finance director proposes recording nothing, as the unrealised gain on the accessories covers the loss on the bikes. Record the required entry.Journal entryL3Variant
- The management accountant of Textiles Brenne compares the total cost of finished goods (500,000) with their total net realisable value (520,000) and concludes that no write-down is needed. However, the winter coat line, with a cost of 80,000, has a net realisable value of 62,000; for all other items, net realisable value exceeds cost. What is the error?Single choiceL3
- Câbleries du Rhône has a reporting date of 31 December 20X1. A batch of copper cables is held in inventory at a cost of 210,000; based on the price lists in force at the reporting date, its net realisable value was estimated at 230,000. On 20 January 20X2, before the financial statements are finalised, quality control discovers an insulation defect caused during manufacture and present before the reporting date; the batch is sold to a customer who accepts a discount, for an amount net of costs to sell of 185,000. Which measurement should be used at 31 December 20X1?Single choiceL3
- Conserverie Port-Lazare produces three ranges: canned sardines in three sauces (same purposes, produced and sold in the same geographical area, and which in practice cannot be evaluated separately from one another), soups in cartons and pet food. These ranges belong to two operating segments. At what level should the write-down of the sardines to net realisable value be assessed?Single choiceL3
- Électronique Valbrune has a reporting date of 31 December 20X1. It holds 5,000 tablets of the same model, at a unit cost of 300. At the reporting date, the list price is 360 and the costs necessary to make the sale are estimated at 20 per unit. A competitor launched a more powerful model in November 20X1, which was already weighing on demand at the reporting date. In January 20X2, before the financial statements are finalised, Valbrune sells 1,200 tablets at 290 each, and its sales team states that the rest of the batch cannot be sold above that price, with selling costs remaining at 20 per unit. On 25 February 20X2, still before the financial statements are finalised, Valbrune decides to launch a new version of its tablet, which brings the price of the old model down to 240. Write a memo determining the measurement of the batch at 31 December 20X1.JudgmentL4
Firm sales contracts and materials held for production8 questions
- Ternoval has signed firm sales contracts covering a quantity of wood pellets greater than the quantity it holds in inventory. True or false: any provision needed for the contractual quantity in excess of the inventories held is determined under the net realisable value rules of IAS 2.True / falseL2
- The trader Ardelle holds 800 tonnes of soybean meal. It has entered into a firm sales contract covering 500 tonnes at a fixed price. On what basis is the net realisable value of the 300 tonnes not covered by this contract estimated?Single choiceL2
- At the year-end, Kalvéra holds … dosing pumps with a unit cost of …. It has entered into a firm sales contract for … pumps at a unit price of …. The remaining pumps will be sold at the general selling price, estimated at … per unit. Costs necessary to make the sale are estimated at … per pump for all sales (case data). Compute the write-down to recognise and the carrying amount of the pumps after the write-down.CalculationL3Variant
- Caves Dorvalle holds … bottles of the same vintage, with a unit cost of …. To sell part of the lot, it has signed a firm sales contract with a restaurant owner for … bottles at a unit price of …. The rest of the lot sells at the current price of … per bottle. Estimated costs necessary to make the sale amount to … per bottle (case data). Determine the write-down of the lot and its carrying amount at the year-end.CalculationL3Variant
- Ferlune manufactures cast-iron radiators. At the year-end, the market price of the pig iron it holds in inventory has fallen. Select the correct statements on the measurement of this inventory of materials.Multiple choiceL3
- Atelier Norvane manufactures city bikes and racing frames. At the year-end, it holds two raw materials. Aluminium (cost €60,000, replacement cost €52,000) is used in the city bikes, whose expected unit cost is €400 for a net realisable value of €520. Carbon fibre (cost €90,000, replacement cost €75,000) is used in the racing frames, whose expected unit cost is €1,300 for a net realisable value of €1,150; the carbon fibre inventory is sufficient for 100 frames. For carbon fibre, management considers replacement cost to be the best available measure of its net realisable value. Which conclusion should be reached?Single choiceL4
- Fonderie Brésal holds … kg of an alloy purchased at a cost of … per kg. At the year-end, the price of the alloy has collapsed: its replacement cost is … per kg. Each casting uses … kg of alloy. The castings made from this alloy have an expected production cost of … per casting, for an estimated net realisable value of … per casting. Management considers, as a documented judgement, that replacement cost is the best available measure of the net realisable value of the alloy. Compute the write-down of the alloy and its carrying amount.CalculationL4Variant
- The chocolate maker Cacaoria has built up an inventory of … kg of cocoa beans, paid … per kg. An exceptional harvest drives prices down: at the year-end, these beans could be bought back at … per kg. The fall in cocoa prices passes through to the selling prices of gift boxes: the expected cost of a box, which uses … kg of beans, is … while its net realisable value is now only …. After analysis, management retains replacement cost as the best available measure of the net realisable value of the beans. What write-down should be recognised on the beans, and at what carrying amount?CalculationL4Variant
Reassessment and reversal of write-downs12 questions
- Lumen wrote down at the end of 20X1 a batch of desk lamps, still in inventory, after a fall in their selling price. In 20X2, the selling price of this model rises markedly following a change in economic circumstances. True or false: a write-down of inventories recognised in a prior period can never be reversed.True / falseL2
- Which of the following situations, observed at the year-end at a garden equipment distributor, leads to the reversal of a write-down of inventories?Single choiceL2
- The management accountant of Pivelle is preparing an internal memo on reversals of inventory write-downs. Select the correct statements.Multiple choiceL2
- At the end of 20X1, Carrelia reduced a batch of ceramic tiles, with a cost of …, to its net realisable value of …. At the end of 20X2, the batch is still in inventory; the recovery of the construction market has pushed prices up and the revised net realisable value of the batch is …. Compute the reversal of the write-down and the new carrying amount of the batch.CalculationL2Variant
- A batch of garden furniture purchased for … by the retailer Jardiflor was carried in the statement of financial position at the end of 20X1 at …, after a write-down caused by a rainy summer. One year later, the batch has not been sold, but strong seasonal demand makes it possible to estimate its net realisable value at …. What amounts does Jardiflor retain for the reversal and for the carrying amount of the batch at the end of 20X2?CalculationL2Variant
- At the end of 20X1, the distributor Optivue wrote down three batches of spectacle frames. At the end of 20X2, the situation is as follows: the Azur batch (cost …, carrying amount …) has a revised net realisable value of …; the Brume batch (cost …, carrying amount …) has a revised net realisable value of …; the Corail batch was entirely sold during 20X2. The increases in net realisable value result from a change in economic circumstances. Compute, item by item, the total reversals for 20X2 and the total carrying amount of the batches still held.CalculationL3Variant
- The fabric trader Textilor wrote down its rolls of linen and silk last year, as they had become hard to sell. This year, fashion is turning back to natural materials and the rolls, still in the warehouse, are finding buyers again. Linen: cost …, opening carrying amount …, net realisable value at the year-end …. Silk: cost …, opening carrying amount …, net realisable value at the year-end …. Determine the total reversals for the year and the total carrying amount of the two product lines at the year-end.CalculationL3Variant
- Horlogia holds an inventory of diving watches with a cost of …, reduced at the end of 20X1 to …. At the end of 20X2, the watches are still in inventory and the rise in market prices brings their net realisable value to …. Record the entry at the end of 20X2.Journal entryL2Variant
- Tonnellerie Sablière keeps in inventory oak barrels that cost it …. Overproduction had led to carrying them at … at the previous year-end. This year, a shortage of stave wood drives prices up and the net realisable value of the barrels reaches …. Record the effect of this development at the year-end.Journal entryL3Variant
- At the end of 20X1, Brivane reduced an inventory of solar panels with a cost of €90,000 to €70,000, after a collapse in selling prices. At the end of 20X2, the panels are still in inventory; a new public support scheme has clearly pushed prices back up, and net realisable value is estimated at €98,000. Management is hesitating between several treatments. Which one complies with IAS 2?Single choiceL3
- In 20X3, Pavane reverses €4,000 of a write-down recognised in 20X2 on rugs still in inventory, as their net realisable value has recovered. How is this reversal presented?Single choiceL3
- The Mélèze sawmill wrote down an inventory of planks in 20X1 after a fall in timber prices. At the end of 20X2, the planks are still in inventory and there is clear evidence of an increase in their net realisable value because of changed economic circumstances. True or false: the write-down is reversed, limited to its original amount.True / falseL2
Recognition of inventories as an expense12 questions
- True or false: when inventories are sold, their carrying amount is recognised as an expense in the period in which the related revenue is recognised.True / falseL1
- During the year-end physical count, the hardware store Brassac finds that goods have disappeared following a theft. When is the corresponding loss of inventories recognised as an expense?Single choiceL1
- Mavrel takes metal sections from its inventories to build a hangar itself, which it will use for its own needs. True or false: the carrying amount of the sections used is recognised immediately as an expense, since they will never be sold.True / falseL2
- The bookshop Pagerie had opening inventories of …. During the year, it bought books at a cost of …. Its closing inventories, measured at cost, amount to …. All decreases in inventories are sales whose revenue is recognised in the year; there were no losses and no write-downs. Compute the amount of inventories recognised as an expense for the year.CalculationL1
- For 20X2, the wholesaler Distrimax reports: carrying amount of goods sold …; write-downs to net realisable value recognised at the year-end …; goods destroyed by water damage …; reversal of a 20X1 write-down on items still in inventory whose selling price has recovered …. Compute the total amount of inventories recognised as an expense in 20X2.CalculationL2Variant
- The household appliance retailer Électroprime recognised revenue of … in 20X1 (given, determined under IFRS 15). The appliances sold had a carrying amount of …. At the year-end, models that had become obsolete were written down by …, and breakage found in the warehouse represents …. Finally, a batch of air conditioners written down last year and still in inventory saw its net realisable value recover, hence a reversal of …. What amount of inventories is recognised as an expense in 20X1?CalculationL2Variant
- The Ombrelle shop sells in March a batch of umbrellas whose carrying amount in inventory is …. The revenue from the sale is recognised in March (given). Record the entry for the derecognition of the inventories.Journal entryL1Variant
- Galerie Mobilis had acquired designer sofas at a cost of …. At the end of 20X1, these sofas were reduced to their net realisable value, i.e. a carrying amount of …. They are sold in February 20X2, revenue being recognised at that date (given). Record the derecognition of the sofas.Journal entryL2Variant
- The equipment maker Mécanor takes spare parts from its inventories, with a carrying amount of …, to assemble a machine that it will use in its own workshop. Record the allocation of these parts.Journal entryL2Variant
- The telecoms operator Fibrelia holds reels of optical fibre intended for resale to installers. It decides to use part of them, with a carrying amount of …, to roll out its own network, which it accounts for as property, plant and equipment. The controller proposes to recognise these reels as an expense of the year. Record the correct entry.Journal entryL3Variant
- To train the new accountants of Quarzine, the finance director writes statements on the recognition of inventories as an expense. Select those that are correct.Multiple choiceL2
- In 20X1, the building materials merchant Bâtir Solenne sells to its customers bricks with a carrying amount of €60,000, the related revenue being recognised in 20X1 (given). It also uses bricks from its inventory, with a carrying amount of €45,000, to build its new head office, which it will occupy itself and account for as property, plant and equipment. Which treatment should be applied for 20X1?Single choiceL3
Disclosures8 questions
- Granova has pledged part of its inventories as security for a bank loan. True or false: its financial statements disclose the carrying amount of inventories pledged as security for liabilities.True / falseL2
- In 20X2, Pelvane reversed a write-down of inventories recognised in 20X1. In addition to the amount of the reversal, which information does IAS 2 require on this matter?Single choiceL2
- The consolidation team of the Ostrane group is drawing up the checklist of disclosures on inventories required by IAS 2. Select the items that must appear in it.Multiple choiceL3
- The packaging manufacturer Plastiform is preparing its note on inventories. Which breakdown of the carrying amount of inventories meets IAS 2?Single choiceL3
- Métallerie Corvex is preparing its note on inventories for 20X2. Data: carrying amount of goods sold €820,000; fixed production overheads not allocated to inventories, as production was below normal capacity (case data), €35,000; abnormal amount of production costs due to exceptional wastage of materials €12,000; distribution costs €40,000, which Corvex's documented accounting policy does not include in this amount. What amount of inventories recognised as an expense during the period must Corvex disclose?Single choiceL3
- Velorance is closing its 20X2 financial year. Data: inventories measured using the first-in, first-out (FIFO) formula; total carrying amount €640,000 (materials €210,000, work in progress €130,000, finished goods €300,000); amount of inventories recognised as an expense €2,900,000; write-downs for the year €25,000; reversal of €8,000 following the end of a temporary price war; inventories of €150,000 pledged as security for a bank loan; no inventories are carried at fair value less costs to sell. Four draft notes are proposed. Which one meets the requirements of IAS 2?Single choiceL4
- The commodity broker-trader Granexa measures part of its grain inventories at fair value less costs to sell (case data). The rest of its inventories is measured at the lower of cost and net realisable value. True or false: its financial statements disclose the carrying amount of inventories carried at fair value less costs to sell.True / falseL3
- You are reviewing Fabrimo's note on inventories for 20X2. Data: materials are measured using the first-in, first-out (FIFO) formula and finished goods using weighted average cost (case data); write-downs of €14,000 were recognised; a reversal of €6,000 was recorded following the recovery of the copper price; inventories of €200,000 secure a bank loan. Select the correct statements on the content of the note.Multiple choiceL4