- 20 Marks
FA – Nov 2022 – L1 – SB – Q5 – Accounting for Inventories (IAS 2)
This question asks for the definition of inventories, costs included in inventory measurement, excluded costs, and the calculation of total cost of inventory.
Question
a. Explain the term “inventories” as defined by IAS 2 – Inventories.
(3 Marks)
b. Explain the costs that should be included when measuring the value of inventories.
(8 Marks)
c. Identify the costs that should be excluded from the measurement of inventories.
(4 Marks)
d. Ebuka and Sons Enterprise is a manufacturing entity which imports some of its raw materials from overseas. The entity recently took delivery of some materials as detailed below:
(i) 2,000kg of materials at ₦625 per kg subject to a trade discount of 5%.
(ii) Import duties and other non-recoverable taxes paid amounted to ₦266,000.
(iii) 3% early payment discount allowance enjoyed by the enterprise amounted to ₦37,500.
(iv) Delivery cost on materials imported from customs warehouse to production plant was ₦125,000.
(v) 3,500kg of local materials at ₦250 per kg subject to a trade discount of ₦50,000.
(vi) Carriage inwards on local materials purchased was ₦205,000.
(vii) Special toll fare paid to commodity board for local materials purchased was ₦25,000.
Required:
i. Calculate the total cost of inventory of raw materials. (3 Marks)
ii. It is estimated that these materials can produce 5,000 units of finished product. Calculate the material cost per unit of finished product. (2 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: Cost of Conversion, Exclusion of Costs, IAS 2, Inventories
- Level: Level 1
- Topic: Accounting for Inventories (IAS 2)
- Series: NOV 2022