I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

period of trading? 

A 

$2,500 due to the tax authorities 

B 

$2,500 receivable from the tax authorities 

C 

$1250 due to the tax authorities 

D 

Nil due to or receivable from the tax authorities 

 

(2 marks) 

28 

Michael, a sales tax registered trader, sells goods on credit to Darren for $880 plus sales tax. 

Darren is not registered for sales tax. Sales tax is charged at 20%. 

What are the entries in Michael's accounts for this sale? 

 

Sales account 

Sales tax account 

Receivables account 

A 

DR 880 

nil 

CR 880 

B 

DR 880 

DR 176 

CR 1,056 

C 

CR 880 

nil 

DR 880 

D 

CR 880 

CR 176 

DR 1,056 

 

(2 marks) 

29 

According to IAS 2 Inventories, which of the following costs should be included in valuing the 

inventories of a manufacturing company?  

1 

Carriage inwards  

2 

Carriage outwards  

3 

Depreciation of factory plant  

4 

Storage costs of finished goods 

A 

All four items 

B 

1, 2 and 4 only 

C 

2 and 3 only 

D 

1 and 3 only 

 

(2 marks) 

30 

A company values its inventory using the first in, first out (FIFO) method. At 1 January 20X5 the 

company had 800 widgets in inventory, valued at $75 each.  

During the year ended 31 December 20X5 the following transactions took place.  

20X5 

 

 

 

1 February 

Purchased 

500 widgets 

At $80 each 

1 May 

Sold 

400 widgets 

For $45,000 

1 August 

Purchased 

450 widgets 

At $69 each 

15 November 

Sold 

450 widgets 

For $28,750 

What is the value of the company's closing inventory of widgets at 31 December 20X5? 

A $8,000 

 

B $66,854 

C $67,050 

D $68,000 

 

(2 marks) 

BPP Tutor Toolkit Copy

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PRACTICE QUESTION BANK 

 

491 

31 

In times of rising prices, the FIFO method of inventory valuation, when compared with the 

average cost method of inventory valuation, will usually produce which of the following? 

A 

A higher profit and a lower closing inventory value 

B 

A higher profit and a higher closing inventory value 

C 

A lower profit and a lower closing inventory value 

D 

A lower profit and a higher closing inventory value 

 

(2 marks) 

32 

An organisation's inventory at 1 July is 15 units @ $3.00 each. The following movements occur. 

3 July 20X6 

5 units sold at $3.30 each 

8 July 20X6 

10 units bought at $3.50 each 

12 July 20X6 

8 units sold at $4.00 each 

 

What would be the closing inventory at 31 July, using the FIFO method of inventory valuation? 

A $31.50 

B $36.00 

C $39.00 

D $41.00 

 

(2 marks) 

33 

Your organisation uses the continuous weighted average cost method of valuing inventories. 

During August 20X1, the following inventory details were recorded. 

Opening balance 

30 units valued at $2 each 

5 August 

purchase of 50 units at $2.40 each 

10 August 

issue of 40 units 

18 August  

purchase of 60 units at $2.50 each 

23 August 

issue of 25 units