Cost Valuation – Knowsia

FR – L2 – Q18 – Inventories

Calculate the value of raw materials and finished goods inventories for Tamasi Manufacturing at 31 Dec 20X5 per IAS 2 using FIFO.

Question

Tamasi Manufacturing was formed on 1 January 20X5. The entity manufactures and sells a single product and values it on a first-in, first-out basis.
One tonne of raw material is processed into one tonne of finished goods.
The following details relate to 20X5.

Purchases of raw materials
Purchases:
Price: GH¢100,000 per tonne on 1 January, increasing to GH¢150,000 per tonne on 1 July
Import duties: GH¢10,000 per tonne
Transport from docks to factory: GH¢20,000 per tonne

Production costs
Production capacity: 1,000 tonnes of raw materials per week
Variable costs: GH¢25,000 per tonne
Fixed costs: GH¢30,000,000 per week
Sales details
Selling price: GH¢240,000 per tonne
Delivery costs to customers: GH¢8,000 per tonne
Selling costs: GH¢4,000 per tonne

Inventories at 31 December 20X5
Raw materials: 2,000 tonnes
Finished goods: 2,000 tonnes

There is a ready market for raw materials and the NRV of the raw materials is higher than its cost.

Required
Calculate and disclose the value of inventories at 31 December 20X5 in accordance with IAS 2.

Answer

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Tags: Cost Valuation, FIFO, IAS 2, Inventories, Manufacturing, Net Realisable Value
Level: Level 2

Topic: Financial Reporting Standards and Their Applications

Title: FR – L2 – Q16 – Inventories

Calculate inventory value at 31 Dec using FIFO, NRV, and IAS 2 for Bolga Limited.

Question

Bolga Limited has the following purchases and sales of a particular product line.

	Units purchased	Purchase price per unit	Units sold	Selling price per unit
		GH₵’000		GH₵’000
2 December	100	500	60	530
16 December	60	503	80	528
30 December	70	506	50	524
14 January	50	509	70	524
28 January	80	512	50	520
11 February	40	515	40	520

At 31 December the physical inventory was 150 units. The cost of inventories is determined on a FIFO basis. Selling and distribution costs amount to 5% of selling price and general administration expenses amount to 7% of selling price.

Required
(a) State any three reasons why the net realisable value of inventory may be less than cost.

(b) Calculate to the nearest GH₵’000 the value of inventory at 31 December
(i) at cost
(ii) at net realisable value
(iii) at the amount to be included in the financial statements in accordance with IAS 2

Answer

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Tags: Cost Valuation, FIFO, Financial Statements, IAS 2, Inventories, Net Realisable Value
Level: Level 2

Topic: Financial Reporting Standards and Their Applications

Tag (SQ): Cost Valuation

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FR – L2 – Q18 – Inventories

Calculate the value of raw materials and finished goods inventories for Tamasi Manufacturing at 31 Dec 20X5 per IAS 2 using FIFO.

Title: FR – L2 – Q16 – Inventories

Calculate inventory value at 31 Dec using FIFO, NRV, and IAS 2 for Bolga Limited.

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FR – L2 – Q18 – Inventories

Calculate the value of raw materials and finished goods inventories for Tamasi Manufacturing at 31 Dec 20X5 per IAS 2 using FIFO.

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Title: FR – L2 – Q16 – Inventories

Calculate inventory value at 31 Dec using FIFO, NRV, and IAS 2 for Bolga Limited.

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