ACCA FA Inventories Practice Questions
Inventories makes up 4 of every 50 questions on a Tigertest ACCA FA practice test. Here are 10 of the 16 questions on it, each with the answer and the reason.
Updated by the Tigertest team. Based on ACCA's FA syllabus and study guide for 2026-27, with IFRS 18 formats. Original Section A style questions; Section B not included. Not affiliated with ACCA.
1. Under IAS 2, net realisable value is the estimated selling price less:
- A.Replacement cost of the item
- B.Costs to complete and to sell
- C.The normal profit margin
- D.The original purchase cost
Answer: B. NRV is the estimated selling price in the ordinary course of business less the estimated costs of completion and the costs needed to make the sale. Inventory is then carried at the lower of cost and NRV.
2. Which cost is excluded from the cost of inventory?
- A.Import duties
- B.Production overheads
- C.Carriage inwards
- D.Carriage outwards
Answer: D. Cost includes costs of purchase and conversion and bringing the goods to their present location. Carriage outwards is a cost of selling, so it is a distribution expense.
3. An item cost $640. It can be sold for $700 after repairs costing $95, and the salesperson earns a 5% commission on the selling price. The item should be valued at:
- A.$570
- B.$700
- C.$640
- D.$605
Answer: A. NRV = $700 - $95 - (5% x $700 = $35) = $570, below cost of $640, so the item is carried at $570. Forgetting the commission gives $605.
4. A business holds three product lines: A cost $4,200, NRV $5,100; B cost $3,700, NRV $2,850; C cost $1,750, NRV $1,900. Closing inventory is:
- A.$9,850
- B.$10,700
- C.$8,800
- D.$9,650
Answer: C. The lower of cost and NRV is applied line by line: $4,200 + $2,850 + $1,750 = $8,800. Comparing the totals ($9,650 cost against $9,850 NRV) would hide the loss on line B.
5. Opening inventory was 40 units at $15. Purchases were 120 units at $18, then 80 units at $21. 170 units were sold. Closing inventory under FIFO is:
- A.$1,140
- B.$1,260
- C.$1,470
- D.$1,295
Answer: C. FIFO assumes the oldest units are sold first, so the 70 left are the latest purchases: 70 x $21 = $1,470. Periodic weighted average gives 70 x $18.50 = $1,295.
6. Opening inventory was 100 units at $6. The business bought 300 units at $8, sold 250 units, bought 150 units at $9, then sold 120 units. Closing inventory using continuous weighted average cost is:
- A.$1,485
- B.$1,590
- C.$1,350
- D.$1,424
Answer: A. After the first purchase the average is $3,000 / 400 = $7.50, leaving 150 units at $1,125. After the second purchase it is $2,475 / 300 = $8.25, so the 180 units left are worth $1,485. A periodic average gives about $1,424.
7. When purchase prices are falling, compared with AVCO, FIFO gives:
- A.The same profit in every period
- B.Higher closing inventory and profit
- C.Lower cost of sales and higher profit
- D.Lower closing inventory and profit
Answer: D. FIFO leaves the newest units, now the cheapest, in closing inventory and charges the older, dearer costs to cost of sales, so closing inventory and profit are both lower than under AVCO.
8. The year-end entry to record closing inventory is:
- A.Dr Inventory (SOFP), Cr Revenue
- B.Dr Inventory (SOFP), Cr Cost of sales
- C.Dr Cost of sales, Cr Inventory (SOFP)
- D.Dr Purchases, Cr Inventory (SOFP)
Answer: B. Closing inventory is an asset and reduces cost of sales. Next year the opening inventory is transferred back with Dr Cost of sales, Cr Inventory.
9. Opening inventory was $23,400, purchases $187,500, carriage inwards $4,100, purchase returns $2,700 and closing inventory $26,900. Cost of sales is:
- A.$192,400
- B.$185,400
- C.$181,300
- D.$190,800
Answer: B. Cost of sales = $23,400 + $187,500 + $4,100 - $2,700 - $26,900 = $185,400. Carriage inwards is part of cost of sales; leaving it out gives $181,300.
10. The year end is 31 December. A count on 6 January values inventory at cost of $51,200. From 1 to 6 January, goods costing $3,300 were received and sales of $4,000 were made at a mark-up of 25% on cost. Inventory at cost on 31 December was:
- A.$51,300
- B.$51,900
- C.$50,900
- D.$51,100
Answer: D. Work back from the count: take out goods received after the year end and add back the cost of goods sold since. Cost of those sales is $4,000 / 1.25 = $3,200, so $51,200 - $3,300 + $3,200 = $51,100.
Practice all 16 inventories questions, and the rest of the 200-question bank, in the free ACCA FA training sets. Questions you miss come back until you have mastered them.
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