1. True or False.

Trade discounts, rebates and other similar items are deducted in determining the
costs of purchase.
2. An SME buys goods priced at P500 per unit. The supplier awards the buyer a 20% discount on
orders of 100 units or more. Furthermore, when the buyer has purchased 1,000 units or more in a
calendar year, the supplier awards the buyer a further volume discount of 10% of the list price. The
addl volume discount applies to all units acquired during the year. On January 1, 2014, the SME
purchased 800 units from the supplier. On December 24, 2014, the SME purchased a further 200
units. On December 31, 2013, 150 units acquired from the supplier were unsold. What is the cost of
inventory on Dec. 31, 2013?
3. True or False. Section 13 Inventories applies to biological assets related to agricultural activity
and agricultural produce at the point of harvest.
4. An entity shall measure inventories at:
a. LCNRV
b. Fair value c. Historical cost

d. Present value of future cash flows

5. Dora the Explorer Corp. purchased goods amounting to 760,900 in July 15. It has a beginning
inventory balance amounting to 985,432 and reported OPEX and costs of goods sold amounting to
754,342 and 674,231 respectively. Determine the cost of ending inventory it should report in its
balance sheet for that year.
6. True or False. An entity shall allocate variable production overheads to the costs of conversion on
the basis of the normal capacity of the production facilities.
7. Net realizable value is:
a. Current replacement cost
b. Estimated selling price less estimated cost to complete and estimated cost to sell
c. Estimated selling price less estimated cost to complete
8. The beginning inventory of an SME amounts to 400,000. During the year, SME sold inventories
amounting to 670,000. At year-end, its ending inventory amounts to 200,000. How much is its
purchases for that year?
9. True or False. The costs of conversion of inventories comprise the purchase price, import duties
and other taxes (other than those subsequently recoverable by the entity from the taxing
authorities), and transport, handling and other costs directly attributable to the acquisition of
finished goods, materials and services.
10. Fixed production overheads include all of the following, except:
a. Indirect materials b. Depreciation of a factory building
c. Cost of factory management and
admin
11. Josie Corp. Purchased goods amounting to 342,567 on its year 2 of operations. It reported cost of
goods sold and ending inventories worth 675,341 and 782,345 respectively. Determine its inventory
at the beginning of the year.
12. True or False. When by-product is immaterial, the entity shall measure them at selling price less
costs to complete and sell and deduct this amount from the cost of the main product.
13. How should trade discounts be dealt with when valuing inventories at LCNRV?
a. Added to cost
b. Ignored
c. Deducted in arriving at NRV
d. Deducted from cost
14. Mich Company has a beginning inventory worth 561,547. It purchased goods amounting to 432,345
for that year. After the physical count of inventory, it discovered that its EI is 542,567. It reported
sales amounting to 867,789 for the year. Its operating expenses amounted to 542,456. Determine
its gross profit.
15. Statement 1: Inventories purchased on deferred settlement terms are not considered as inventory.
Statement 2: According to Section 12, an entity shall include other costs in the cost of inventories
only to the extent that they are incurred in bringing the inventories to their present location and
condition.
a. True, False
b. False, True
c. False, False
d. True, True

16. Jeopardy. These include costs directly related to the units of production, such as direct labour and
a systematic allocation of fixed and variable production overheads that are incurred in converting
materials into finished goods.
17. Trivia. Peter Gene Hernandez is a famous singer, songwriter. Who is HE? Hint: Today I dont feel
like doing anything.
18. Brain Teaser. Which word in the dictionary is spelled incorrectly?
19. Brain Teaser. Which has 4 eyes but cant see? Hint: Make sure its correctly spelled.
20. Brain Teaser. If I have it, I dont share it. If I share it, I dont have it. What is it? Hint: Starts with an
S and ends with a T.

Answer key:
1. True
2. 52,500
3. False
4. A
5. 1,072,101
6. False
7. B
8. 470,000
9. False
10.A
11.1,115,119
12.True
13.D
14.416,464
15.False
16.What are costs of conversion?
17.Bruno Mars
18.Incorrectly
19.Mississippi
20.Secret