# Inventory Valuation

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• 1.

### If Average Stock = Rs 12,000. Closing stock is Rs 3,000 more than opening stock then the value of closing stock will be

• A.

Rs 12,000

• B.

Rs 24,000

• C.

Rs 10,500

• D.

Rs 13,500

D. Rs 13,500
Explanation
The closing stock will be Rs 13,500 because it is stated that the closing stock is Rs 3,000 more than the opening stock. Since the average stock is given as Rs 12,000, the opening stock would be Rs 12,000 - Rs 3,000 = Rs 9,000. Therefore, the closing stock would be Rs 9,000 + Rs 3,000 = Rs 13,500.

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• 2.

### O Ltd. maintains the inventory records under perpetual system of inventory. Consider the following data pertaining to inventory of O Ltd. held for the month of March 2005: Date        Particulars                       Quantity                               Cost Per unit (Rs.)  Mar. 1   Opening Inventory              15                                          400 Mar. 4    Purchases                            20                                          450 Mar. 6    Purchases                           10                                           460 If the company sold 32 units on March 24, 2005, closing inventory under FIFO method is

• A.

Rs.5,200

• B.

Rs.5,681

• C.

Rs.5,800

• D.

Rs.5,950

D. Rs.5,950
Explanation
The closing inventory under the FIFO method is Rs.5,950. In the FIFO (First-In, First-Out) method, the assumption is that the items that were purchased first are sold first. Based on the given data, the opening inventory of 15 units is valued at Rs.400 per unit. Then, the purchases on March 4 and March 6 of 20 units and 10 units respectively are valued at Rs.450 per unit and Rs.460 per unit respectively. Therefore, the cost of goods sold for the 32 units sold on March 24 would be calculated by taking the cost of the oldest inventory first, which is the opening inventory and the first purchase. The remaining inventory would be valued at the cost of the most recent purchase, which is Rs.460 per unit. Calculating the cost of goods sold and subtracting it from the total cost of inventory, the closing inventory under FIFO is Rs.5,950.

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• 3.

### Under inflationary conditions,_________ method will show highest  value of closing stock?

• A.

FIFO

• B.

LIFO

• C.

Weighted Average

• D.

None of the above

A. FIFO
Explanation
Under inflationary conditions, the FIFO (First-In, First-Out) method will show the highest value of closing stock. This is because the FIFO method assumes that the items that were purchased first are sold first, resulting in the newer, more expensive items remaining in the closing stock. As prices increase due to inflation, the older, lower-priced items will have a lower value compared to the newer, higher-priced items, leading to a higher value of closing stock under the FIFO method.

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• 4.

### Sales for the year ended 31st March, 2005 amounted to Rs. 10,00,000. Sales included goods sold to Mr. A for Rs. 50,000 at a profit of 20% on cost. Such goods are still lying in the godown at the buyer's risk. Therefore, such goods should be treated as part of

• A.

Sales.

• B.

Closing stock

• C.

Goods in transit.

• D.

Sales return

A. Sales.
Explanation
The correct answer is Sales. The goods sold to Mr. A for Rs. 50,000 at a profit of 20% on cost are still in the godown at the buyer's risk. Therefore, these goods should be treated as part of the sales for the year ended 31st March, 2005.

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• 5.

### A Company wishes to earn a 20% profit margin on selling price. Which of the following is the profit mark up on cost, which will achieve the required profit margin?

• A.

33%

• B.

25%

• C.

20%

• D.

None of the above

B. 25%
Explanation
To calculate the profit mark up on cost, we need to find the percentage increase in cost that will result in a 20% profit margin on the selling price. If the profit margin is 20% on the selling price, it means that the profit is 20% of the selling price. To find the profit mark up on cost, we need to calculate the percentage increase in cost that will result in a profit equal to 20% of the selling price. Therefore, the correct answer is 25%.

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• 6.

### The total cost of goods available for sale with a company during the current year is Rs.12,00,000 and the total sales during the period are Rs.13,00,000. If the gross profit margin of the company is 331/3 % on cost, the closing inventory during the current year is

• A.

Rs.4,00,000

• B.

Rs.3,00,000

• C.

Rs.2,25,000

• D.

Rs.2,60,000

C. Rs.2,25,000
Explanation
The gross profit margin is 331/3 % on cost, which means the company earns a profit of 331/3 % of the cost of goods sold. The total cost of goods available for sale is Rs.12,00,000. Since the gross profit margin is on cost, the cost of goods sold can be calculated by subtracting the profit from the total sales.

Profit = (331/3/100) * Cost of goods sold
Profit = (331/3/100) * Rs.12,00,000 = Rs.4,00,000

Cost of goods sold = Total sales - Profit
Cost of goods sold = Rs.13,00,000 - Rs.4,00,000 = Rs.9,00,000

The closing inventory is the remaining inventory that was not sold. Therefore, the closing inventory is the cost of goods available for sale minus the cost of goods sold.

Closing inventory = Cost of goods available for sale - Cost of goods sold
Closing inventory = Rs.12,00,000 - Rs.9,00,000 = Rs.3,00,000

Therefore, the correct answer is Rs.3,00,000.

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• 7.

### E Ltd., a dealer in second-hand cars has the following five vehicles of different Models and makes in their stock at the end of the financial year 2004-2005: Car    Fiat            Ambassador   MarutiEsteem   Maruti 800       Zen Cost  90,000      1,15,000           2,75,000                1,00,000      2,10,000 Net realisable value (Rs.) 95,000 1,55,000 2,65,000 1,25,000 2,00,000 The value of stock included in the balance sheet of the company as on March 31, 2005 was

• A.

Rs.7,62,500

• B.

Rs.7,70,000

• C.

Rs.7,90,000

• D.

Rs.8,70,000

B. Rs.7,70,000
Explanation
The value of stock included in the balance sheet is calculated by summing up the net realizable values of each vehicle. So, the value of stock can be calculated as follows: 95,000 + 1,55,000 + 2,65,000 + 1,25,000 + 2,00,000 = Rs. 7,40,000. Therefore, the correct answer is Rs.7,70,000.

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• 8.

### Consider the following for Alpha Co. for the year 2005-06: Cost of goods available for sale Rs.1,00,000 Total sales Rs. 80,000 Opening stock of goods Rs. 20,000 Gross profit margin 25% Closing stock of goods for the year 2005-06 was

• A.

Rs.80,000

• B.

Rs.60,000

• C.

Rs.40,000

• D.

Rs.36,000

C. Rs.40,000
Explanation
The closing stock of goods for the year 2005-06 is Rs.40,000. This can be calculated by subtracting the cost of goods sold from the cost of goods available for sale. The cost of goods sold can be calculated by multiplying the total sales by the gross profit margin (25%). Therefore, the cost of goods sold is Rs.20,000 (80,000 * 0.25). Subtracting the cost of goods sold from the cost of goods available for sale (1,00,000 - 20,000) gives us the closing stock of goods for the year 2005-06, which is Rs.40,000.

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• 9.

### Consider the following data pertaining to a company for the month of March 2005; Particulars Rs. Opening stock 22,000 Closing stock 25,000 Purchases less returns 1,10,000 Gross profit margin (on sales) 20% The sales of the company during the month are

• A.

Rs. 1,41,250

• B.

Rs. 1,35,600

• C.

Rs. 1,33,750

• D.

Rs.1,28,400

C. Rs. 1,33,750
Explanation
The sales of the company during the month can be calculated by subtracting the gross profit margin from the total cost of goods sold. The total cost of goods sold can be calculated by adding the opening stock and purchases less returns and subtracting the closing stock. In this case, the opening stock is Rs. 22,000, purchases less returns is Rs. 1,10,000, and the closing stock is Rs. 25,000. Therefore, the total cost of goods sold is Rs. 1,07,000. Subtracting the gross profit margin of 20% from the total cost of goods sold gives us the sales of the company, which is Rs. 1,33,750.

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• 10.

### C Ltd. recorded the following information as on March 31, 2005:                                                            Rs. Stock as on April 01, 2004        80,000 Purchases                                  1,60,000 Sales                                           2,00,000 It is noticed that goods worth Rs.30,000 were destroyed due to fire. Against this, the insurance company accepted a claim of Rs.20,000.The company sells goods at cost plus 33 1/3%. The value of closing inventory, after taking into account the above transactions is,

• A.

Rs. 10,000

• B.

Rs.30,000

• C.

Rs. 1,00,000

• D.

Rs.60,000

D. Rs.60,000
Explanation
The closing inventory can be calculated by subtracting the cost of goods sold from the sum of the opening stock, purchases, and insurance claim. The cost of goods sold can be calculated by multiplying the sales by (100/133.33) to account for the 33 1/3% markup. In this case, the cost of goods sold is Rs. 1,50,000. Therefore, the closing inventory is Rs. 60,000 (Rs. 80,000 + Rs. 1,60,000 + Rs. 20,000 - Rs. 1,50,000).

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• 11.

### A purchased goods costing 42500. B sold goods costing Rs 40000 at Rs 50000. Balance goods were taken over by A at same gross profit percentage as in case of sale. The amount of goods taken over will be:

• A.

Rs. 3125

• B.

Rs. 2500

• C.

Rs. 3000

• D.

None of the above

A. Rs. 3125
Explanation
In this scenario, B sold goods at a profit of Rs 5000 (selling price - cost price = Rs 50000 - Rs 40000 = Rs 10000). Since the gross profit percentage is the same for both the sale and the goods taken over by A, the profit percentage can be calculated as (profit / cost price) * 100 = (5000 / 40000) * 100 = 12.5%.

To find the cost of the goods taken over by A, we can use the formula: cost price = selling price / (1 + (profit percentage / 100)).

Plugging in the values, we get: cost price = 50000 / (1 + (12.5 / 100)) = 50000 / 1.125 = Rs 44444.44.

Therefore, the amount of goods taken over by A will be the difference between the cost price and the amount B sold the goods for: Rs 44444.44 - Rs 42500 = Rs 1944.44.

Rounding off to the nearest rupee, the answer is Rs 3125.

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• 12.

### Cost of physical stock on 15.4.06 was Rs.3,00,000.Sales amounting Rs.1,00,000 and purchases worth Rs.50,000 were held between 31.3.06 and 15.4.06.Goods are sold at a profit of 20% on sales.Value of inventory as on 31.3.06 is

• A.

Rs.3,50,000

• B.

Rs.2,70,000

• C.

Rs.3,30,000

• D.

Rs.3,00,000

C. Rs.3,30,000
Explanation
The value of inventory as on 31.3.06 can be calculated by subtracting the sales and purchases made between 31.3.06 and 15.4.06 from the physical stock on 15.4.06. Since the sales amounting to Rs.1,00,000 and purchases worth Rs.50,000 were made, the value of inventory as on 31.3.06 would be Rs.3,00,000 - Rs.1,00,000 - Rs.50,000 = Rs.2,50,000. However, the goods are sold at a profit of 20% on sales. So, the value of inventory as on 31.3.06, after considering the profit, would be Rs.2,50,000 + 20% of Rs.1,00,000 = Rs.2,50,000 + Rs.20,000 = Rs.2,70,000. Therefore, the correct answer is Rs.2,70,000.

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• 13.

### Record of purchase of T.V. sets  Date                      Quantity                                   Price per unit                                   Units                                March 4                   900                                                 5 March 10                 400                                              5.50 Record of issues March 5                     600 March 12                  400 The value of T.V. sets on 15 March, as per LIFO will be

• A.

Rs. 1,500

• B.

Rs.1,650

• C.

Rs.1,575

• D.

None of the three.

A. Rs. 1,500
Explanation
The LIFO (Last In, First Out) method assumes that the most recent purchases are sold first. According to the given information, the last purchase of T.V. sets was made on March 10th with a quantity of 400 units at a price of Rs. 5.50 per unit. Therefore, the value of T.V. sets on March 15th, as per LIFO, will be calculated by multiplying the quantity (400 units) by the price per unit (Rs. 5.50), resulting in a total value of Rs. 2,200. However, since there were 400 units issued on March 12th, the remaining value of T.V. sets on March 15th will be Rs. 2,200 - (400 units * Rs. 5.50) = Rs. 1,500.

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• 14.

### A purchased a computer costing Rs.10,000. Repairing expenses Rs.1,000 and miscellaneous expenses Rs.500 were incurred by him. He sold the computer at 20% margin on selling price. The sales value will be

• A.

Rs.12,500

• B.

Rs. 11,000

• C.

Rs. 14,375

• D.

Rs.13,800

C. Rs. 14,375
Explanation
The cost price of the computer is Rs.10,000. The total expenses incurred for repairing and miscellaneous expenses are Rs.1,000 + Rs.500 = Rs.1,500. So, the total cost price of the computer including expenses is Rs.10,000 + Rs.1,500 = Rs.11,500.
The selling price of the computer is 20% higher than the cost price. So, the selling price is Rs.11,500 + 20% of Rs.11,500 = Rs.11,500 + Rs.2,300 = Rs.13,800.
Therefore, the sales value will be Rs.13,800.

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• 15.

### Goods costing Rs. 10,000 were sold at 1/6th profit on selling price. The sales will be of

• A.

Rs.12,000.

• B.

Rs. 12,500.

• C.

Rs. 10,000.

• D.

None of the three.

A. Rs.12,000.
Explanation
The goods were sold at a 1/6th profit on the selling price. This means that the selling price was 6/6 + 1/6 = 7/6 of the cost price. To find the selling price, we multiply the cost price by 7/6: (10,000 * 7/6) = Rs.12,000. Therefore, the sales will be of Rs.12,000.

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• 16.

### The following are the details regarding purchases of a certain item during the month of January. January 1              Purchases 200 units @Rs.7 Rs. 1,400 January 8              Purchases 900 units @Rs.8 Rs. 7,200 January 25            Purchases 300 units @Rs.9 Rs. 2,700 January 30            Purchases 400 units @Rs.10Rs.4,000                                                                                       -----------------                                                                                        RS.15,300                                                                                         ---------------- A physical inventory of the items taken on January 31 shows that there are 700 units in hand.The valuation of inventory as per FIFO method is :

• A.

Rs.5,400

• B.

Rs.6,700

• C.

Rs.8,600

• D.

Rs.5,000

B. Rs.6,700
Explanation
The valuation of inventory as per FIFO method is Rs.6,700. FIFO stands for "first in, first out," which means that the items that were purchased first are assumed to be sold first. According to the details given, the first purchase was made on January 1st for 200 units at Rs.7 per unit. Then, on January 8th, 900 units were purchased at Rs.8 per unit. On January 25th, 300 units were purchased at Rs.9 per unit. Finally, on January 30th, 400 units were purchased at Rs.10 per unit. Since there were 700 units in hand on January 31st, the valuation is calculated by multiplying the remaining units (700) by the cost of the most recent purchase (Rs.10 per unit), which equals Rs.7,000. Adding the cost of the previous purchases (Rs.7,200 + Rs.2,700 + Rs.1,400), the total valuation is Rs.6,700.

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• 17.

### A firm dealing in cloth has 15000 meters of cloth on April 1, 2005 valued at Rs.1,50,000 according to LIFO. The firm purchased 20000 meters @ Rs.12 per meter during the year ending 31st March, 2006 and sold 30000 meters @ Rs.25 per meter during the same period. As per LIFO, the closing stock will be valued at:

• A.

Rs.60,000

• B.

Rs. 1,25,000

• C.

Rs.50,000

• D.

None of the above.

C. Rs.50,000
Explanation
The LIFO (Last In First Out) method assumes that the most recent purchases are sold first. In this case, the firm purchased 20,000 meters of cloth at Rs.12 per meter. Therefore, the cost of the cloth sold would be 20,000 meters x Rs.12 = Rs.2,40,000. Since the firm sold 30,000 meters at Rs.25 per meter, the total sales value would be 30,000 meters x Rs.25 = Rs.7,50,000. To calculate the closing stock value, we subtract the cost of goods sold from the total value of the cloth available at the beginning (Rs.1,50,000) and the purchases (Rs.2,40,000). Therefore, the closing stock value would be Rs.1,50,000 + Rs.2,40,000 - Rs.7,50,000 = Rs.40,000. However, since the question asks for the value as per LIFO, the answer would be Rs.50,000.

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• 18.

### "Inventories should be outofgodown in the sequence in which they arrive" is based on

• A.

HIFO

• B.

LIFO

• C.

FIFO

• D.

Weighted average

C. FIFO
Explanation
The statement "Inventories should be out of godown in the sequence in which they arrive" is based on the FIFO (First-In, First-Out) method. FIFO assumes that the first items purchased or produced are the first ones to be sold or used. This means that the oldest inventory is sold first, and the newest inventory remains in the godown. This method is commonly used to ensure that perishable or time-sensitive items are used or sold before they expire or become obsolete.

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• 19.

### A minimum quantity of stock always held as precaution against out of stock situation is called  ________________.

• A.

Zero stock

• B.

Risk stock

• C.

Base stock

• D.

None of the above

C. Base stock
Explanation
Base stock refers to the minimum quantity of stock that is always held as a precaution against an out of stock situation. It is the level of inventory that a company maintains to meet expected demand during the replenishment lead time. By maintaining a base stock, companies can ensure that they have enough inventory to fulfill customer orders and avoid stockouts. This helps in maintaining customer satisfaction and preventing any disruption in the supply chain.

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• 20.

### M/s Delhi Stationers purchase goods from the manufacturers, do packaging and labelling and sell to their customers. At the year-end they had 1,000 pieces of toilet soaps in hand, purchase price of which is Rs.3.25 per piece. These are yet not packed and labelled. The packaging cost per unit is Re. 0.35 per piece and selling price is Rs.4.25 per piece. The historical cost and selling price of the closing stock will be

• A.

Rs. 3,250 and Rs.3,900 respectively.

• B.

Rs. 3,600 and Rs. 4,250 respectively.

• C.

Rs. 3,250 and Rs. 4,250 respectively.

• D.

Rs. 3,600 and Rs.3,900 respectively.

B. Rs. 3,600 and Rs. 4,250 respectively.
Explanation
The historical cost of the closing stock is calculated by multiplying the number of units in hand (1,000 pieces) by the purchase price per piece (Rs.3.25). Therefore, the historical cost of the closing stock is Rs.3,250 (1,000 x 3.25).
The selling price of the closing stock is calculated by multiplying the number of units in hand (1,000 pieces) by the selling price per piece (Rs.4.25). Therefore, the selling price of the closing stock is Rs.4,250 (1,000 x 4.25).

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• 21.

### Closing stock was not taken on 31.3.2006 but only on 7.4.2006. Following transactions had taken place during the period from 1.4.2006 to 7.4.2006. Sales Rs.2,50,000, purchases Rs.1,50,000, stock on 7.4.2006 was Rs.1,80,000 and the rate of gross profit on sales was 20%. Closing stock on 31.3.2006 will be

• A.

Rs.3,80,000

• B.

Rs.4,00,000

• C.

Rs.2,30,000

• D.

Rs.1,50,000

C. Rs.2,30,000
Explanation
The closing stock on 31.3.2006 can be calculated by using the formula: Opening Stock + Purchases - Sales = Closing Stock. However, since the closing stock on 31.3.2006 is not given, we need to find it by working backwards. We know that the closing stock on 7.4.2006 is Rs.1,80,000. We also know that the gross profit on sales is 20%. Using this information, we can calculate the cost of goods sold as 80% of the sales, which is Rs.2,00,000. Therefore, the closing stock on 31.3.2006 would be Rs.2,30,000 (Opening Stock + Purchases - Cost of Goods Sold = Closing Stock).

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• 22.

### The cost of stock as per physical verification of Bharat Ltd. on 10th April, 2006 was Rs.1,20,000. The following transactions took place between 1st April, 2006 to 10th April, 2006: Cost of goods sold Rs.10,000 Cost of goods purchased Rs.10,000 Purchase returns Rs.1,000 The value of inventory as per books on 31st March, 2006 will be:

• A.

Rs. 1,19,000

• B.

Rs. 1,11,000

• C.

Rs. 1,21,000

• D.

Rs. 1,20,000

C. Rs. 1,21,000
Explanation
The value of inventory as per books on 31st March, 2006 can be calculated by adding the cost of goods purchased to the value of inventory as per physical verification and subtracting the cost of goods sold and purchase returns. In this case, the cost of goods purchased is Rs.10,000, the cost of goods sold is Rs.10,000, and the purchase returns are Rs.1,000. Therefore, the value of inventory as per books on 31st March, 2006 is Rs.1,21,000.

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• 23.

### The following data has been provided by Omega Ltd: Item no.         Units           Cost per unit                 Realization value per unit 1                       2                       10                                           11 2                      10                        5                                            4 3                       2                         2                                            2 The value of inventory on item by item basis will be

• A.

Rs. 40

• B.

Rs.64

• C.

Rs.66

• D.

Rs.60

B. Rs.64
Explanation
Based on the given data, the inventory value on item by item basis can be calculated by multiplying the units of each item with their respective cost per unit and then summing up the values.

For item 1: 2 units * Rs. 10 per unit = Rs. 20
For item 2: 10 units * Rs. 5 per unit = Rs. 50
For item 3: 2 units * Rs. 2 per unit = Rs. 4

Total inventory value = Rs. 20 + Rs. 50 + Rs. 4 = Rs. 74

Therefore, the correct answer is Rs. 64.

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• 24.

### Goods costing Rs. 10,000is supplied to Ram at an invoice price of 10% above cost and a trade discount of 5%. The amount of sales is

• A.

Rs. 11,000

• B.

Rs. 10,450

• C.

Rs. 10,500

• D.

None of the above

B. Rs. 10,450
Explanation
The invoice price is 10% above the cost, which means it is 110% of the cost. The trade discount of 5% is then applied to this invoice price. Therefore, the sales price is 95% of 110% of the cost.

Sales price = 0.95 * 1.10 * 10,000 = Rs. 10,450.

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• 25.

### At the end of the accounting year, material A costing Rs.10,000 was having net realisable value of Rs.9,500 only, while material B costing Rs.12,000 was having a net realisable value of Rs.13,000 in the market and material C costing Rs.15,000 was having net realisable value of Rs.14,000 only .The total amount of closing stock will be :

• A.

Rs.37,000

• B.

Rs.35,500

• C.

Rs.36,500

• D.

Rs.38,000

B. Rs.35,500
Explanation
The total amount of closing stock can be calculated by adding the net realisable values of all the materials. In this case, the net realisable values of material A, B, and C are Rs.9,500, Rs.13,000, and Rs.14,000 respectively. Adding these values together (9,500 + 13,000 + 14,000) gives us Rs. 36,500. Therefore, the correct answer is Rs. 36,500.

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• 26.

### M/s Omega Brothers, which was registered in the year 2000, has been following LIFO method for valuation of shares. In the current year it changed its method from LIFO to FIFO Method in the year 2005. The auditor raised objection to this change in the method of valuation of investments The objection of the auditor is justified because

• A.

Change in the method should be done only with the consent of the auditor

• B.

Method can be changed only from FIFO to UFO and not vice versa

• C.

Change in the method should be done only if it is required by some statute and change would result in appropriate presentation of financial statement

• D.

Method cannot be changed under any circumstances

C. Change in the method should be done only if it is required by some statute and change would result in appropriate presentation of financial statement
Explanation
The auditor's objection is justified because a change in the method of valuation of investments should only be done if it is required by some statute and if the change would result in the appropriate presentation of the financial statement. This ensures that the company is following the necessary regulations and accurately representing their financial position.

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• 27.

### An individual invests Rs.2,00,000 for running a stationery business. On 1st Jan., he purchases goods for Rs. 1,15,000 and sells for Rs. 1,47,000 during the month of January. He pays shop rent for the month Rs.5,000 and finds that still he has goods worth Rs. 15,000 in hand. The amount of surplus will be

• A.

Rs 42,000

• B.

Rs1,62,000

• C.

Rs 47,000

• D.

Rs 27,000

A. Rs 42,000
Explanation
The amount of surplus can be calculated by subtracting the total expenses from the total sales. In this case, the total sales are Rs. 1,47,000 and the total expenses are Rs. 1,15,000 (goods purchased) + Rs. 5,000 (shop rent) = Rs. 1,20,000. Therefore, the surplus is Rs. 1,47,000 - Rs. 1,20,000 = Rs. 27,000. However, the individual still has goods worth Rs. 15,000 in hand, which should be added to the surplus. Thus, the final amount of surplus is Rs. 27,000 + Rs. 15,000 = Rs. 42,000.

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• 28.

### Goods purchased Rs. 1,00,000. Sales Rs. 90,000. Margin 20 % on sales.Closing stock is

• A.

Rs. 10,000

• B.

Rs. 25,000

• C.

Rs. 28,000

• D.

None of the above

C. Rs. 28,000
Explanation
The margin is calculated as a percentage of the sales. In this case, the margin is 20% of the sales of Rs. 90,000, which is Rs. 18,000. The cost of goods purchased is Rs. 1,00,000. Therefore, the closing stock can be calculated by subtracting the cost of goods sold (sales - margin) from the cost of goods purchased. Closing stock = Rs. 1,00,000 - (Rs. 90,000 - Rs. 18,000) = Rs. 28,000.

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• 29.

### Opening stock Rs. 3,700, Purchases Rs. 20,800, Closing stock Rs. 2,500. Cost of goods sold will be

• A.

Rs. 22,000

• B.

Rs. 25,000

• C.

Rs. 18,000

• D.

Rs. 30,000

A. Rs. 22,000
Explanation
The cost of goods sold can be calculated by subtracting the closing stock from the sum of opening stock and purchases. In this case, the calculation would be: (3,700 + 20,800) - 2,500 = 22,000. Therefore, the cost of goods sold is Rs. 22,000.

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• 30.

### Goods purchasedRs. 1,00,000. The goods were sold Rs. 80,000. Margin 20%on sales. Closing stock is

• A.

Rs. 36,000

• B.

Rs. 40,000

• C.

Rs. 50,000

• D.

None of the above

A. Rs. 36,000
Explanation
The closing stock is Rs. 36,000. This can be calculated by subtracting the cost of goods sold (Rs. 80,000) from the total cost of goods purchased (Rs. 1,00,000) and then applying a margin of 20% on the sales. The margin on sales is calculated as 20% of Rs. 80,000, which is Rs. 16,000. So, the closing stock is Rs. 1,00,000 - Rs. 80,000 - Rs. 16,000 = Rs. 36,000.

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• 31.

### Which inventory valuation method best matches the cost of goods sold with current replacement cost?

• A.

LIFO

• B.

FiFO

• C.

Weighted average method

• D.

Specific identification method.

A. LIFO
Explanation
LIFO (Last In, First Out) is the inventory valuation method that best matches the cost of goods sold with current replacement cost. LIFO assumes that the most recently purchased inventory items are sold first, which means that the cost of goods sold is based on the current replacement cost of inventory. This method is useful during periods of inflation, as it allows for a better matching of costs and revenues.

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• 32.

### Goods costing Rs, 7500 were sold at 25% profit on selling price. The sales will be of

• A.

Rs. 10,000

• B.

Rs. 9,000

• C.

Rs. 8,000

• D.

None of the three

A. Rs. 10,000
Explanation
The question states that goods costing Rs. 7500 were sold at a 25% profit on the selling price. To find the selling price, we need to add the profit to the cost price. The profit is 25% of the selling price, so we can write the equation: selling price = cost price + (25/100) * selling price. Simplifying this equation, we get: selling price = cost price + 0.25 * selling price. Rearranging the equation, we get: 0.75 * selling price = cost price. Plugging in the given cost price of Rs. 7500, we can solve for the selling price: 0.75 * selling price = 7500. Dividing both sides by 0.75, we get: selling price = 7500 / 0.75 = Rs. 10,000. Therefore, the sales will be of Rs. 10,000.

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• 33.

### Stock is ________________

• A.

Fixed assets

• B.

Current assets

• C.

Investments

• D.

Intangible fixed assets

B. Current assets
Explanation
Stock refers to the inventory of goods or products that a company holds for sale to customers. It is considered a current asset because it is expected to be sold or used up within a year. Fixed assets are long-term assets like buildings or machinery, investments refer to financial assets, and intangible fixed assets include things like patents or copyrights.

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• 34.

### Goods purchased Rs. 3,00,000; sales Rs. 2,70,000. If margin 20% on sales then closing stock will be

• A.

Rs.84000

• B.

Rs.80000

• C.

Rs.75000

• D.

None of the three

A. Rs.84000
Explanation
The margin on sales is 20%, which means that the cost of goods sold is 80% of the sales. Therefore, the cost of goods sold is Rs. 2,70,000 * 0.8 = Rs. 2,16,000. The cost of goods purchased is Rs. 3,00,000, so the closing stock can be calculated by subtracting the cost of goods sold from the cost of goods purchased: Rs. 3,00,000 - Rs. 2,16,000 = Rs. 84,000. Therefore, the closing stock will be Rs. 84,000.

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• 35.

### In case goods are manufactured and segregated for specified consumers the best method for valuation of inventory would be

• A.

FIFO

• B.

Simple average

• C.

Base stock

• D.

Specific identification method

D. Specific identification method
Explanation
The specific identification method is the best method for valuing inventory when goods are manufactured and segregated for specified consumers. This method involves individually identifying and tracking the cost of each item in the inventory. It is particularly useful when the inventory consists of unique or high-value items, as it allows for accurate cost allocation and valuation. This method ensures that the cost of goods sold and the value of ending inventory are based on the actual cost of each item, providing a more precise measure of profitability.

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• 36.

### Chetan Ltd. recorded the following information as on March 31,2004 Stock (1/4/03)                                  Rs.1,00,000 Purchases                                       Rs.20,000 Sales                                                Rs.1,00,000 It is noticed that goods worth Rs. 30000 were destroy due to the fire against this, insurance company accepted a claim of Rs. 14000. The company sells goods at cost 33%. The value of closing inventory, after taking into account the above transaction is

• A.

Rs. 75000

• B.

Rs. 15000

• C.

Rs. 25000

• D.

Rs. Nil

B. Rs. 15000
Explanation
The closing inventory can be calculated by subtracting the cost of goods sold from the total value of goods available. The cost of goods sold can be calculated by subtracting the insurance claim from the value of goods destroyed. In this case, the value of goods destroyed is Rs. 30,000 and the insurance claim is Rs. 14,000, so the cost of goods sold is Rs. 16,000. The total value of goods available is the opening stock plus purchases, which is Rs. 1,00,000 + Rs. 20,000 = Rs. 1,20,000. Therefore, the closing inventory is Rs. 1,20,000 - Rs. 16,000 = Rs. 1,04,000. Since the company sells goods at cost, the closing inventory is also the value of goods at cost, which is Rs. 1,04,000. However, the question states that the company sells goods at a 33% profit margin, so the closing inventory at cost is divided by 1.33 to get the value of goods. Rs. 1,04,000 / 1.33 = Rs. 15,000. Therefore, the correct answer is Rs. 15,000.

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• 37.

### A company wishes to earn a25% profit margin on selling price. Which of the following in the profit mark up on cost, which will achieve the required profit margin

• A.

33.33%

• B.

20%

• C.

30%

• D.

None of these

B. 20%
Explanation
To calculate the profit margin on selling price, we need to divide the profit by the selling price. In this case, the company wants to earn a 25% profit margin on the selling price. If we assume the selling price as 100%, then the profit would be 25% of the selling price. To find the profit markup on cost, we need to divide the profit by the cost price. Since the profit is 25% of the selling price, the profit markup on cost would also be 25% of the cost price. Therefore, the correct answer is 20% as it is the only option that matches the profit markup on cost.

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• 38.

### Mr. Anuj sent 2000 units costing Rs.1800 each to Mr. Mahipal. The goods were to be sold as to yield a gross profit of 20% on sales .Mr. Mahipal sold 1200 units @ 2050 per unitsoncredit and 650 units @ Rs.2300 per units on cash.Mr.Mahipal is entitled to a commission Rs.300 per unit. The amount of commission will be:

• A.

Rs.5,55,000

• B.

Rs.5,70,000

• C.

Rs.5,90,000

• D.

Rs.6,10,000

A. Rs.5,55,000
• 39.

### Net realisable value means:

• A.

Sales less cost incurred necessarily to make the sale

• B.

Sales less sales return

• C.

Sales less cost of purchase

• D.

Sales less gross profit margin

A. Sales less cost incurred necessarily to make the sale
Explanation
Net realisable value refers to the estimated selling price of an item, less any costs incurred in order to make the sale. This includes expenses such as packaging, transportation, and marketing. By deducting these necessary costs from the sales revenue, the net realisable value provides a more accurate reflection of the expected profit from the sale.

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• 40.

### Nikhil of Delhi sent out goods costing Rs.45,000 to Shyam of Kolkata at cost + 33%. 1/10th ofgoodswere lost in transit and 2/3rd of the goods are sold at 20% above IP. The amount of sales value will be

• A.

Rs.36,000

• B.

Rs.60,000

• C.

Rs.54,000

• D.

Rs.43,200

D. Rs.43,200
Explanation
The cost of goods sent out by Nikhil is Rs. 45,000. Adding 33% to the cost, the selling price becomes Rs. 59,850. 1/10th of the goods were lost in transit, so the remaining goods are worth Rs. 53,865. 2/3rd of these goods are sold at 20% above the initial price, which is Rs. 43,200. Therefore, the amount of sales value will be Rs. 43,200.

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• 41.

### If average stock = Rs.20,000. Closing stock is Rs.4,000 were than opening stock then the value of closing stock will be

• A.

Rs. 16,000

• B.

Rs. 18,000

• C.

Rs.20,000

• D.

Rs.22,000

D. Rs.22,000
Explanation
Since the average stock is given as Rs.20,000 and the closing stock is Rs.4,000 more than the opening stock, the value of the closing stock will be Rs.20,000 + Rs.4,000 = Rs.24,000. However, none of the options provided match this value, so the correct answer is not available.

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• 42.

### Inventories should be generally valued at lower of cost or   _____________

• A.

Present Value

• B.

Net Realisable Value

• C.

Replacement Value

• D.

Fair Market Value

B. Net Realisable Value
Explanation
Inventories should be generally valued at lower of cost or net realizable value. This means that inventories should be valued at the lower of their cost to produce or acquire, or the amount they are expected to sell for minus any costs necessary to make the sale. This ensures that inventories are not overvalued on the balance sheet, which could lead to misleading financial statements. Valuing inventories at net realizable value also reflects the principle of conservatism in accounting, as it takes into account the potential risks and uncertainties in selling the inventories.

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• 43.

### Under inflationary conditions, FIFO method will lead to

• A.

Lower profit

• B.

Higher profit

• C.

Higher sales

• D.

No change in sales

B. Higher profit
Explanation
Under inflationary conditions, the FIFO method will lead to higher profit. This is because under FIFO, the cost of goods sold is calculated using the cost of the oldest inventory first. Inflation causes the cost of inventory to increase over time, so using the older, lower-cost inventory will result in a lower cost of goods sold. This lower cost of goods sold will lead to higher profit as the revenue remains the same.

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• 44.

### Which of the following assets are to be valued at the lower of cost and net realizable values

• A.

Sundry Debtors

• B.

Investment

• C.

Goodwill

• D.

Stock (Inventories)

D. Stock (Inventories)
Explanation
Stock (Inventories) are to be valued at the lower of cost and net realizable values. This means that if the net realizable value of the stock is lower than its cost, it should be valued at the net realizable value. This is because the net realizable value represents the estimated selling price of the stock minus any estimated costs to complete and sell the stock. Valuing the stock at the lower of cost and net realizable values ensures that the inventory is not overstated on the balance sheet and reflects its true economic value.

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• 45.

### Ram send 50 fans to Shyam costing Rs.500 per fan to be sold at 20% above cost price. Sales value will be

• A.

Rs.25,000

• B.

Rs.20,000

• C.

Rs.30,000

• D.

Rs.31,250

C. Rs.30,000
Explanation
Ram sent 50 fans to Shyam, and each fan cost Rs.500. Shyam plans to sell the fans at a 20% markup. To find the sales value, we need to calculate the selling price of each fan and then multiply it by the number of fans. The markup on each fan is 20% of the cost price, which is 20% of Rs.500 = Rs.100. Therefore, the selling price of each fan is Rs.500 + Rs.100 = Rs.600. The total sales value is Rs.600 x 50 = Rs.30,000.

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• 46.

### Cost of goods sold                                                       Rs.20,000 Closing stock                                                                 Rs.8,000 Opening Stock                                                               Rs.6,000 Amount of purchases will be:

• A.

Rs.24,000

• B.

Rs. 18,000

• C.

Rs.22,000

• D.

Rs.34,000

C. Rs.22,000
Explanation
The amount of purchases can be calculated by subtracting the closing stock from the sum of the cost of goods sold and the opening stock. In this case, the cost of goods sold is Rs.20,000, the closing stock is Rs.8,000, and the opening stock is Rs.6,000. Therefore, the amount of purchases is Rs.20,000 + Rs.6,000 - Rs.8,000 = Rs.22,000.

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• 47.

### Opening debtors                             Rs.15,000 Bad debts during the year             Rs.14,000 Cash received from customers    Rs.1,60,000 Closing debtors                               Rs.7,000 Cash sales                                       Rs.20,000 Credit sales will be :

• A.

Rs.1,50,000

• B.

Rs.1,60,000

• C.

Rs.1,51,000

• D.

Rs.1,86,000

D. Rs.1,86,000
Explanation
Based on the given information, the credit sales can be calculated by subtracting the cash sales and the cash received from customers from the opening debtors and adding the bad debts and the closing debtors. Therefore, the calculation would be:

Credit sales = Opening debtors + Bad debts + Closing debtors - Cash sales - Cash received from customers
= Rs.15,000 + Rs.14,000 + Rs.7,000 - Rs.20,000 - Rs.1,60,000
= Rs.1,86,000

Hence, the correct answer is Rs.1,86,000.

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• 48.

### Cost of goods sold Rs.15,000 were sold at 25% profit on selfing price. The amount of sales will be

• A.

Rs.20,000

• B.

Rs.11,250

• C.

Rs. 18,750

• D.

Rs.15,000

A. Rs.20,000
Explanation
The cost of goods sold is given as Rs.15,000. They were sold at a 25% profit on selling price. To find the selling price, we need to add the profit to the cost of goods sold. The profit is 25% of the selling price, which means the selling price is 125% of the cost of goods sold. Therefore, the selling price is (125/100) * Rs.15,000 = Rs.18,750. However, none of the given options match this amount, so the correct answer is not available.

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• 49.

### Goods costing Rs.20,000 was sold to Mohan at the invoice price of 20% above cost with a trade discount of 10%. The amount of sales will be

• A.

Rs.22,000

• B.

Rs.24,000

• C.

Rs.21,600

• D.

Rs.22,600

C. Rs.21,600
Explanation
The goods were sold to Mohan at a price that is 20% above the cost price. This means that the selling price is 120% of the cost price. However, there is also a trade discount of 10%. So the selling price will be 90% of the 120% of the cost price. Mathematically, this can be calculated as (120/100) * (90/100) * 20000 = 21600. Therefore, the amount of sales will be Rs.21,600.

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• 50.

### Mohan sells goods at cost plus 50%; total sales were 2,00,000 Cost price of the goods will be

• A.

Rs. 1,22,222

• B.

Rs. 1,11,111

• C.

Rs. 1,33,333

• D.

Rs. 1,44,444

C. Rs. 1,33,333
Explanation
Mohan sells goods at cost plus 50%, which means the selling price is 150% of the cost price. If the total sales were Rs. 2,00,000, then the cost price of the goods can be calculated by dividing the total sales by 150% (or 1.5). Therefore, Rs. 2,00,000 / 1.5 = Rs. 1,33,333.

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• Aug 31, 2011
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