Inventory Valuation

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  • 1/65 Questions

    Stock is ________________

    • Fixed assets
    • Current assets
    • Investments
    • Intangible fixed assets
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Inventory Valuation - Quiz
About This Quiz

This Inventory Valuation quiz assesses knowledge on various inventory accounting methods and their impacts on financial statements. It covers FIFO, perpetual inventory systems, and profit calculations, essential for professionals in finance and accounting.

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  • 2. 

    Inventories should be generally valued at lower of cost or   _____________                                            

    • Present Value

    • Net Realisable Value

    • Replacement Value

    • Fair Market Value

    Correct Answer
    A. 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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  • 3. 

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

    • Rs. 36,000

    • Rs. 40,000

    • Rs. 50,000

    • None of the above

    Correct Answer
    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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  • 4. 

    A, B andC are the partners sharing profits and losses in the ratio of 5:3:2, took a joint life policy of Rs. 30,000. On the death of B what amount will be payable to each partner.  

    • A - Rs. 22,000 and B - Rs. 8,000

    • A - Rs. 14,000 and B - Rs. 16,000

    • A - Rs. 15,000, B - Rs. 9,000 and C - Rs. 6,000

    • A-Rs. 10,000, B-Rs.8,000 andC-Rs.10,000

    Correct Answer
    A. A - Rs. 15,000, B - Rs. 9,000 and C - Rs. 6,000
    Explanation
    The partners A, B, and C share profits and losses in the ratio of 5:3:2. They took a joint life policy of Rs. 30,000. On the death of B, the amount payable to each partner will be based on their profit-sharing ratio.

    The total ratio is 5+3+2 = 10.

    To find the amount payable to each partner, we divide the total policy amount by the total ratio and multiply it by each partner's individual ratio.

    For partner A:
    (30,000/10) * 5 = Rs. 15,000

    For partner B:
    (30,000/10) * 3 = Rs. 9,000

    For partner C:
    (30,000/10) * 2 = Rs. 6,000

    Therefore, the amount payable to each partner is A - Rs. 15,000, B - Rs. 9,000, and C - Rs. 6,000.

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  • 5. 

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

    • Sundry Debtors

    • Investment

    • Goodwill

    • Stock (Inventories)

    Correct Answer
    A. 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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  • 6. 

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

    • Rs. 22,000

    • Rs. 25,000

    • Rs. 18,000

    • Rs. 30,000

    Correct Answer
    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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  • 7. 

    Net realisable value means:  

    • Sales less cost incurred necessarily to make the sale

    • Sales less sales return

    • Sales less cost of purchase

    • Sales less gross profit margin

    Correct Answer
    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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  • 8. 

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

    • FIFO

    • LIFO

    • Weighted Average

    • None of the above

    Correct Answer
    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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  • 9. 

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

    • Rs.84000

    • Rs.80000

    • Rs.75000

    • None of the three

    Correct Answer
    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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  • 10. 

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

    • Rs. 10,000

    • Rs. 9,000

    • Rs. 8,000

    • None of the three

    Correct Answer
    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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  • 11. 

    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:

    • Rs.5,55,000

    • Rs.5,70,000

    • Rs.5,90,000

    • Rs.6,10,000

    Correct Answer
    A. Rs.5,55,000
  • 12. 

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

    • HIFO

    • LIFO

    • FIFO

    • Weighted average

    Correct Answer
    A. 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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  • 13. 

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

    • Rs.24,000

    • Rs. 18,000

    • Rs.22,000

    • Rs.34,000

    Correct Answer
    A. 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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  • 14. 

    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  

    • Rs. 11,000

    • Rs. 10,450

    • Rs. 10,500

    • None of the above

    Correct Answer
    A. 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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  • 15. 

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

    • Rs.25,000

    • Rs.20,000

    • Rs.30,000

    • Rs.31,250

    Correct Answer
    A. 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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  • 16. 

    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?

    • 33%

    • 25%

    • 20%

    • None of the above

    Correct Answer
    A. 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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  • 17. 

    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

    • Rs.3,50,000

    • Rs.2,70,000

    • Rs.3,30,000

    • Rs.3,00,000

    Correct Answer
    A. 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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  • 18. 

    Ram sells goods at cost plus 40%. Total sales were Rs.21,000. Cost price of the goods will be  

    • Rs.8,400

    • Rs.15,000

    • Rs. 12,600

    • Rs.20,000

    Correct Answer
    A. Rs.15,000
    Explanation
    The total sales were Rs.21,000 and the goods were sold at cost plus 40%. This means that the selling price is 140% of the cost price. To find the cost price, we can divide the total sales by 140% (or multiply by 100/140). Therefore, Rs.21,000 divided by 1.4 equals Rs.15,000, which is the cost price of the goods.

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  • 19. 

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

    • LIFO

    • FiFO

    • Weighted average method

    • Specific identification method.

    Correct Answer
    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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  • 20. 

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

    • Zero stock

    • Risk stock

    • Base stock

    • None of the above

    Correct Answer
    A. 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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  • 21. 

    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 :

    • Rs.37,000

    • Rs.35,500

    • Rs.36,500

    • Rs.38,000

    Correct Answer
    A. 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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  • 22. 

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

    • FIFO

    • Simple average

    • Base stock

    • Specific identification method

    Correct Answer
    A. 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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  • 23. 

    Cost of goods sold                                Rs.1,50,000 Closing stock                                          Rs.40,000 Opening stock                                         Rs.60,000 Amount of purchases will be :

    • Rs.1,30,000

    • Rs.1,70,000

    • Rs.50,000

    • None of the above

    Correct Answer
    A. Rs.1,30,000
    Explanation
    The amount of purchases can be calculated by subtracting the closing stock from the cost of goods sold and adding the opening stock. In this case, the cost of goods sold is Rs.1,50,000, the closing stock is Rs.40,000, and the opening stock is Rs.60,000. Therefore, the amount of purchases would be Rs.1,50,000 - Rs.40,000 + Rs.60,000 = Rs.1,30,000.

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  • 24. 

    As per Section 37 of the Indian Partnership Act, 1932, the executors would be entitled at their choice to the interest calculated from the date of death till the date of payment on the final amount due to the  decreased partner at  ________________  percentage per annum.  

    • 7

    • 4

    • 6

    • 12

    Correct Answer
    A. 6
  • 25. 

    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

    • Rs.5,200

    • Rs.5,681

    • Rs.5,800

    • Rs.5,950

    Correct Answer
    A. 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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  • 26. 

    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

    • Rs.7,62,500

    • Rs.7,70,000

    • Rs.7,90,000

    • Rs.8,70,000

    Correct Answer
    A. 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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  • 27. 

    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  

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

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

    • 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

    • Method cannot be changed under any circumstances

    Correct Answer
    A. 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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  • 28. 

    Under inflationary conditions, FIFO method will lead to  

    • Lower profit

    • Higher profit

    • Higher sales

    • No change in sales

    Correct Answer
    A. 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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  • 29. 

    Goods purchased for Rs.2,00,000 and were sold for Rs.1,60,000. Margin 20% on sales. Closing stock is           

    • Rs.32,000

    • Rs.72,000

    • Rs.50,000

    • None of the above

    Correct Answer
    A. Rs.72,000
    Explanation
    The margin is calculated as a percentage of the selling price. If the margin is 20% on sales, it means that the selling price is 120% of the cost price. In this case, the selling price is Rs.1,60,000, so the cost price would be Rs.1,60,000/1.2 = Rs.1,33,333.33. The closing stock is the remaining inventory that has not been sold, so it would be the cost price minus the selling price, which is Rs.1,33,333.33 - Rs.1,60,000 = Rs.72,000. Therefore, the correct answer is Rs.72,000.

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  • 30. 

    A, B and C are partners sharing profits in the ratio 2:2:1. On retirement  of B, goodwill was valued as Rs. 30,000. Find the contribution of A and C to compensate B.  

    • Rs. 20,000 and Rs. 10,000

    • Rs. 8,000 and Rs. 4,000

    • They will not contribute any thing

    • Information is insufficient for any comment

    Correct Answer
    A. Rs. 8,000 and Rs. 4,000
    Explanation
    When B retires, the remaining partners, A and C, need to compensate B for his share of the goodwill. Since the profit sharing ratio is 2:2:1, B is entitled to 2/5th of the goodwill. Therefore, B's share of the goodwill is Rs. 12,000 (2/5 * Rs. 30,000). A and C will contribute to compensate B in the same ratio as their profit sharing ratio, which is 2:1. Therefore, A will contribute 2/3rd of B's share (2/3 * Rs. 12,000) which is Rs. 8,000, and C will contribute 1/3rd of B's share (1/3 * Rs. 12,000) which is Rs. 4,000.

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  • 31. 

    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:

    • Rs.60,000

    • Rs. 1,25,000

    • Rs.50,000

    • None of the above.

    Correct Answer
    A. 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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  • 32. 

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

    • Rs. 1,22,222

    • Rs. 1,11,111

    • Rs. 1,33,333

    • Rs. 1,44,444

    Correct Answer
    A. 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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  • 33. 

    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

    • Rs.4,00,000

    • Rs.3,00,000

    • Rs.2,25,000

    • Rs.2,60,000

    Correct Answer
    A. 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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  • 34. 

    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

    • Rs. 75000

    • Rs. 15000

    • Rs. 25000

    • Rs. Nil

    Correct Answer
    A. 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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  • 35. 

    An undervaluation of previous year's opening inventory will  

    • Cause current year's net income to be overstated

    • Cause previous years net income to be understated

    • Cause previous years net income to be overstated

    • None of the above

    Correct Answer
    A. Cause previous years net income to be overstated
    Explanation
    An undervaluation of previous year's opening inventory will cause previous year's net income to be overstated. This is because the opening inventory is an important component in calculating the cost of goods sold (COGS). If the opening inventory is undervalued, it means that the COGS for the previous year will be lower than it should be. As a result, the net income for the previous year will be higher than it actually is, leading to an overstatement of the net income.

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  • 36. 

    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  

    • Rs.3,80,000

    • Rs.4,00,000

    • Rs.2,30,000

    • Rs.1,50,000

    Correct Answer
    A. 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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  • 37. 

    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:

    • Rs. 3125

    • Rs. 2500

    • Rs. 3000

    • None of the above

    Correct Answer
    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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  • 38. 

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

    • Rs.12,000.

    • Rs. 12,500.

    • Rs. 10,000.

    • None of the three.

    Correct Answer
    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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  • 39. 

    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:  

    • Rs. 1,19,000

    • Rs. 1,11,000

    • Rs. 1,21,000

    • Rs. 1,20,000

    Correct Answer
    A. 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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  • 40. 

    Perpetual inventory valuation system entails    

    • Maintenance of detailed records of receipts and issues

    • Continuous physical verification

    • Reconciliation of physical stocks with the stock as per records

    • All of the above

    Correct Answer
    A. All of the above
    Explanation
    The perpetual inventory valuation system involves maintaining detailed records of receipts and issues, continuously verifying the physical inventory, and reconciling the physical stock with the stock as per records. This means that all of the options mentioned - maintenance of detailed records, continuous physical verification, and reconciliation of physical stocks with records - are part of the perpetual inventory valuation system.

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  • 41. 

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

    • Rs 12,000

    • Rs 24,000

    • Rs 10,500

    • Rs 13,500

    Correct Answer
    A. 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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  • 42. 

    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 :                                                                                               

    • Rs.5,400

    • Rs.6,700

    • Rs.8,600

    • Rs.5,000

    Correct Answer
    A. 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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  • 43. 

    X, Y andZ are partners in a firm. At the time of division of profit for the year there was dispute between the partners. Profits before interest on partner's capital was Rs. 6,000 and Y determined interest @ 24% p.a. on his loan of Rs. 80,000. There was no agreement on this point. Calculate the amount payable toX, Y andZ respectively.  

    • Rs. 2,000 to each partner

    • Loss of Rs. 4,400 for X and Z & Y will take home Rs. 14,800

    • Rs. 400 for X, Rs. 5,200 for Y and Rs. 400 for Z

    • Rs. 2,400 to each partner

    Correct Answer
    A. Rs. 400 for X, Rs. 5,200 for Y and Rs. 400 for Z
    Explanation
    The correct answer is Rs. 400 for X, Rs. 5,200 for Y, and Rs. 400 for Z. This is because Y calculated interest on his loan of Rs. 80,000 at a rate of 24% per annum. The interest on this loan amounts to Rs. 19,200. After deducting this interest from the total profit of Rs. 6,000, the remaining profit is Rs. -13,200. Since there is no agreement on this point, the loss is shared equally among the partners, resulting in a loss of Rs. 4,400 for X and Z. Therefore, the amount payable to X is Rs. 400, to Y is Rs. 5,200, and to Z is Rs. 400.

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  • 44. 

    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

    • Rs. 1,41,250

    • Rs. 1,35,600

    • Rs. 1,33,750

    • Rs.1,28,400

    Correct Answer
    A. 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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  • 45. 

    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

    • Rs. 1,500

    • Rs.1,650

    • Rs.1,575

    • None of the three.

    Correct Answer
    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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  • 46. 

    P andQ are partners sharing Profits in the ratio of 2:1. R is admitted to the partnership with effect from 1st April on the term that he will bring Rs 20000 as his capital for 1/4th share and pays Rs 9000 for good will half of which is to be withdrawn by P and Q how much cash can P & Q withdraw from the firm (if any )   

    • 3000:1500

    • 6000:3000

    • NIL

    • None of the above

    Correct Answer
    A. 3000:1500
    Explanation
    P and Q are partners sharing profits in the ratio of 2:1. R is admitted to the partnership with effect from 1st April, bringing Rs 20000 as his capital for a 1/4th share. R also pays Rs 9000 for goodwill, half of which is to be withdrawn by P and Q. The total capital after R's admission is Rs 20000 + Rs 9000 = Rs 29000. P and Q's share of capital is 2/3 of the total capital, which is (2/3) * Rs 29000 = Rs 19333.33. P and Q can withdraw cash from the firm in the ratio of their capital, which is 2:1. Therefore, P can withdraw (2/3) * Rs 19333.33 = Rs 12888.88 and Q can withdraw (1/3) * Rs 19333.33 = Rs 6444.44. Hence, P and Q can withdraw Rs 12888.88 and Rs 6444.44 respectively, which is equivalent to the ratio 3000:1500.

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  • 47. 

    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

    • Sales.

    • Closing stock

    • Goods in transit.

    • Sales return

    Correct Answer
    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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  • 48. 

    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  

    • Rs. 40

    • Rs.64

    • Rs.66

    • Rs.60

    Correct Answer
    A. 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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  • 49. 

    A ,B and C are equal patners .D is admitted to the firm for one -fourth share .D brings Rs.20,000 capital and Rs.5,000 being half of the premium for goodwill .The value of goodwill of the firm is :

    • Rs.10,000

    • Rs.40,000

    • Rs.20,000

    • None of the above

    Correct Answer
    A. Rs.40,000
    Explanation
    Since D is admitted for a one-fourth share, it means that A, B, and C each have a three-fourth share. D brings Rs.20,000 capital and Rs.5,000 as half of the premium for goodwill. This means that the total premium for goodwill is Rs.10,000. Since D is only contributing half of the premium, it implies that the total value of goodwill is Rs.20,000. Therefore, the correct answer is Rs.20,000.

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