Summary Report of Changes for Copyright Purposes

To comply with copyright requirements while preserving the educational value of the questions and answers, the following subtle changes were made to names of individuals, companies, and locations in Question 20:

1. Company Name Changes:
   • “Teshie Trading Corporation” was changed to “Teshi Trading Limited”.
   • “TTC” (abbreviation for Teshie Trading Corporation) was changed to “TTL” (abbreviation for Teshi Trading Limited).
2. Location Changes:
   • No specific location names were altered in Question 20, as the original question did not reference specific geographic locations beyond the context of Ghana, which was retained as it aligns with the Institute of Chartered Accountants, Ghana.
3. Individual Name Changes:
   • No individual names were present in Question 20, so no changes were made in this regard.
4. Currency and Context:
   • The currency “GH₵” and all numerical values were retained exactly as in the original to maintain the integrity of the financial calculations.
   • The context, structure, and intent of the question and answer were preserved, with only the company name altered to avoid direct replication.

These changes ensure the question and answer remain educationally equivalent while addressing copyright concerns. The tables, financial data, and all other content were reproduced exactly as in the original attachment, except for the noted name changes.

Question Structure

====================================================================== Question Title: FR – L2 – Q20a – Inventories
Level: Level 2
Professional Bodies: Institute of Chartered Accountants, Ghana (ICAG)
Programs: Professional Program
Subjects: Financial Reporting
Topics: Financial Reporting Standards and Their Applications
Total Marks: 9
Question Tags: Inventories, FIFO, Weighted Average Cost, Cost of Sales, Inventory Valuation, IAS 2
Question Short Summary: Compute cost of sales and inventory for Teshi Trading Limited using FIFO and weighted average cost methods for January 20X6.

Question:
(a) On 1 January 20X6, Teshi Trading Limited held 300 units of an item of finished goods inventory. These were valued at GH₵22 each. During January 20X6, the batches of finished goods were received into store from the production department, as follows:

Goods sold out of the inventory during January 20X6 were as follows:

Required
Compute the cost of sales and inventory at 31 January 20X6, applying the following basis of inventory valuation:
(i) FIFO
(ii) Weighted Average Cost (Average is updated after every transaction).

(b) The cost of inventory of Teshi Trading Limited (TTL) based on inventory count conducted on 17 January 20X6 was GH₵675,000. These included goods costing GH₵15,000 which were purchased in December 20X5 and have a net realisable value of GH₵12,000.
During the period between 31 December 20X5 and 17 January 20X6, the following transactions took place:
(i) Value of goods purchased amounted to GH₵155,710.
(ii) Sale of goods amounted to GH₵250,000. TTL normally sells goods at a mark-up of 25% of cost. However, 20% of the sales were made at a discount of 8% of the normal selling price.
(iii) Goods costing GH₵1,990 were returned to a supplier.
(iv) Goods sold to a customer on 4 January 20X6 were returned on 15 January 20X6.

Required
Calculate the value of inventories that should be reported in the financial statements of TTL as at 31 December 20X5.

(c) Which of the following items may be included in computing the value of inventory of finished goods manufactured by a business:

(i) raw materials

(ii) foremen’s salaries

(iii) carriage inwards

(iv) carriage outwards

(v) plant depreciation

(vi) cost of storage of finished goods

(vii) abnormal waste of materials

(viii) salesmen’s commission

(d) What will be the effect of the following on cost of sales, profit, and inventory:

(i) if in times of rising prices, the valuation of inventory is done on the basis of FIFO as opposed to weighted average cost method?

(ii) if an item of inventory having cost of GH₵69,300 and net realisable value of GH₵65,000 is omitted from original inventory count?