Question Tag: Inventories

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FR – May 2024 – L2 – SA – Q6 – Inventory Accounting

Explains perpetual inventory system, differences in inventory counting, and disclosure requirements.

Question

a. IAS 2 – Inventories sets out the requirements to be followed when accounting for inventory and specifies two methods of recording inventory to allow the calculation of cost of sales.

Required:
i. Explain the term ‘Perpetual inventory system’ and identify FIVE possible causes of differences between the balance on the inventory account and the physical inventory counted. (5 Marks)

ii. State the disclosure requirements for inventory in notes to the financial statements. (5 Marks)

b. Many accountants believe that Block-Chain Technology will enhance the recording of financial transactions globally.

Required:
Explain the term “Block-Chain Technology” and state THREE disadvantages of adopting the technology. (5 Marks)

Answer

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Tags: Cost measurement, Disclosure Requirements, IAS 2, Inventories, Perpetual Inventory System
Level: Level 2

Topic: Inventory Accounting (IAS 2)
Series: MAY 2023

FA – Nov 2020 – L1 – SB – Q1 – Financial Statements Preparation

Prepare the manufacturing account and the statement of profit or loss for a family business.

Question

Sweetberry Manufacturing Company is a family business that produces and sells pure water in Lagos. In the year ended October 31, 2019, the following balances were extracted from the company’s ledger accounts:

Item	N’000
Revenue	900,000
Raw materials purchased	180,000
Raw materials carriage expenses	8,000
Carriage outwards	4,000
Wages: Machine operators	184,800
Wages: Factory supervisors	45,000
Salary: Administrative staff	124,000
Salary: Sales and marketing staff	104,000
Distribution cost	4,000
Administration expenses	15,500
Rent and rates	58,000
Utility	6,000
Insurance	9,500
Sales promotion expenses	20,000
Discount received	6,000
Factory plant and machinery	72,000
Office equipment	20,000
Delivery van	36,000
Inventories as at Nov 01, 2018:
– Raw materials	34,000
– Work-in-progress	21,000
– Finished goods	40,000
Inventories as at Oct 31, 2019:
– Raw materials	29,000
– Work-in-progress	32,000
– Finished goods	50,000

The following information is also relevant for the preparation of the financial statements:

(i) Straight line depreciation policy at the following rates:

Factory plant and machinery: 10%
Office equipment: 10%
Delivery van: 20%

(ii) General expenses are to be apportioned as follows:

Expense Item	Factory (%)	Administration (%)
Rent and rates	80	20
Insurance and utility	75	25

(iii) Insurance prepaid amounted to N1.5 million

(iv) Accrued administration expenses amounted to N500,000

Required:

Using the vertical format, prepare the manufacturing account and the statement of profit or loss for the year ended October 31, 2019. (20 Marks)

Answer

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Tags: Depreciation, Factory Overhead, Financial Statements, Inventories, Manufacturing Accounts, Profit and Loss
Level: Level 1

Topic: Financial Statements Preparation
Series: NOV 2020

FA – May 2014 – L1 – SA – Q1c – Accounting for Inventories in Accordance with IAS 2

why (IAS 2) on inventories is not applicable to construction contracts

Question

Explain why International Accounting Standard (IAS 2) on inventories is not applicable to construction contracts.

Answer

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Tags: Accounting Standards, Exclusions, IAS 2, Inventories
Level: Level 1

Topic: Accounting for Inventories (IAS 2)
Series: MAY 2014

FA – May 2014 – L1 – SA – Q1b – Accounting for Inventories in Accordance with IAS 2

costs to include and exclude when measuring inventory cost under IAS 2.

Question

List the costs which should be included when measuring the cost of inventories and identify any cost which should be excluded.

Answer

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Tags: Accounting Standards, Exclusions, IAS 2, Inventories
Level: Level 1

Topic: Accounting for Inventories (IAS 2)
Series: MAY 2014

FA – May 2014 – L1 – SA – Q1a – Accounting for Inventories in Accordance with IAS 2

Definition of inventories

Question

Explain the term “inventories” as defined by International Accounting Standard (IAS 2).

Answer

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Tags: Accounting Standards, Exclusions, IAS 2, Inventories
Level: Level 1

Topic: Accounting for Inventories (IAS 2)
Series: MAY 2014

FA – May 2018 – L1 – SA – Q3 – Accounting for Inventories in Accordance with IAS 2

Identifies the items included in the cost of inventories.

Question

Which of the following is included in the cost of inventories?
A. Abnormal amounts of wasted materials, labour, and other production costs
B. Conversion costs
C. Storage costs
D. Administrative overhead
E. Selling costs

Answer

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Tags: Costs, IAS 2, Inventories

Topic: Accounting for Inventories (IAS 2)
Series: MAY 2018

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)

Answer

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Tags: Cost of Conversion, Exclusion of Costs, IAS 2, Inventories
Level: Level 1

Topic: Accounting for Inventories (IAS 2)
Series: NOV 2022

FA – May 2017 – L1 – SA – Q6 – Accounting for Inventories in Accordance with IAS 2

Deals with IAS 2 on inventories and the financial statements that pertain to it.

Question

IAS 2 deals with
A. Statement of Financial Position
B. Statement of Comprehensive Income
C. Statement of Cash Flow
D. Inventories
E. Depreciation

Answer

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Tags: Depreciation, IAS 2, Inventories, Statement of Comprehensive Income, Statement of Financial Position
Level: Level 1

Topic: Accounting for Inventories (IAS 2)
Series: MAY 2017

FA – May 2016 – L1 – SA – Q6 – Accounting for Inventories in Accordance with IAS 2

A question about the components that are part of the cost of inventories according to IAS 2.

Question

Question:
Which of the following is NOT part of the cost of inventories, in relation to IAS 2 Inventories?
A. The purchase price
B. Import duties
C. Transport costs
D. Handling costs
E. Selling costs

Answer

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Tags: Costs, IAS 2, Inventories
Level: Level 1

Topic: Accounting for Inventories (IAS 2)
Series: MAY 2016

FR – May 2024 – L2 – SA – Q6 – Inventory Accounting

Explains perpetual inventory system, differences in inventory counting, and disclosure requirements.

Question

a. IAS 2 – Inventories sets out the requirements to be followed when accounting for inventory and specifies two methods of recording inventory to allow the calculation of cost of sales.

ii. State the disclosure requirements for inventory in notes to the financial statements. (5 Marks)

b. Many accountants believe that Block-Chain Technology will enhance the recording of financial transactions globally.

Required:
Explain the term “Block-Chain Technology” and state THREE disadvantages of adopting the technology. (5 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cost measurement, Disclosure Requirements, IAS 2, Inventories, Perpetual Inventory System
Level: Level 2

Topic: Inventory Accounting (IAS 2)
Series: MAY 2023

FA – Nov 2020 – L1 – SB – Q1 – Financial Statements Preparation

Prepare the manufacturing account and the statement of profit or loss for a family business.

Question

Item	N’000
Revenue	900,000
Raw materials purchased	180,000
Raw materials carriage expenses	8,000
Carriage outwards	4,000
Wages: Machine operators	184,800
Wages: Factory supervisors	45,000
Salary: Administrative staff	124,000
Salary: Sales and marketing staff	104,000
Distribution cost	4,000
Administration expenses	15,500
Rent and rates	58,000
Utility	6,000
Insurance	9,500
Sales promotion expenses	20,000
Discount received	6,000
Factory plant and machinery	72,000
Office equipment	20,000
Delivery van	36,000
Inventories as at Nov 01, 2018:
– Raw materials	34,000
– Work-in-progress	21,000
– Finished goods	40,000
Inventories as at Oct 31, 2019:
– Raw materials	29,000
– Work-in-progress	32,000
– Finished goods	50,000

The following information is also relevant for the preparation of the financial statements:

(i) Straight line depreciation policy at the following rates:

Factory plant and machinery: 10%
Office equipment: 10%
Delivery van: 20%

(ii) General expenses are to be apportioned as follows:

Expense Item	Factory (%)	Administration (%)
Rent and rates	80	20
Insurance and utility	75	25

(iii) Insurance prepaid amounted to N1.5 million

(iv) Accrued administration expenses amounted to N500,000

Required:

Using the vertical format, prepare the manufacturing account and the statement of profit or loss for the year ended October 31, 2019. (20 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Depreciation, Factory Overhead, Financial Statements, Inventories, Manufacturing Accounts, Profit and Loss
Level: Level 1

Topic: Financial Statements Preparation
Series: NOV 2020

FA – May 2014 – L1 – SA – Q1c – Accounting for Inventories in Accordance with IAS 2

why (IAS 2) on inventories is not applicable to construction contracts

Question

Explain why International Accounting Standard (IAS 2) on inventories is not applicable to construction contracts.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting Standards, Exclusions, IAS 2, Inventories
Level: Level 1

Topic: Accounting for Inventories (IAS 2)
Series: MAY 2014

FA – May 2014 – L1 – SA – Q1b – Accounting for Inventories in Accordance with IAS 2

costs to include and exclude when measuring inventory cost under IAS 2.

Question

List the costs which should be included when measuring the cost of inventories and identify any cost which should be excluded.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting Standards, Exclusions, IAS 2, Inventories
Level: Level 1

Topic: Accounting for Inventories (IAS 2)
Series: MAY 2014

FA – May 2014 – L1 – SA – Q1a – Accounting for Inventories in Accordance with IAS 2

Definition of inventories

Question

Explain the term “inventories” as defined by International Accounting Standard (IAS 2).

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting Standards, Exclusions, IAS 2, Inventories
Level: Level 1

Topic: Accounting for Inventories (IAS 2)
Series: MAY 2014

FA – May 2018 – L1 – SA – Q3 – Accounting for Inventories in Accordance with IAS 2

Identifies the items included in the cost of inventories.

Question

Answer

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Tags: Costs, IAS 2, Inventories

Topic: Accounting for Inventories (IAS 2)
Series: MAY 2018

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:

Answer

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

FA – May 2017 – L1 – SA – Q6 – Accounting for Inventories in Accordance with IAS 2

Deals with IAS 2 on inventories and the financial statements that pertain to it.

Question

IAS 2 deals with
A. Statement of Financial Position
B. Statement of Comprehensive Income
C. Statement of Cash Flow
D. Inventories
E. Depreciation

Answer

Find Related Questions by Tags, levels, etc.

Tags: Depreciation, IAS 2, Inventories, Statement of Comprehensive Income, Statement of Financial Position
Level: Level 1

Topic: Accounting for Inventories (IAS 2)
Series: MAY 2017

FA – May 2016 – L1 – SA – Q6 – Accounting for Inventories in Accordance with IAS 2

A question about the components that are part of the cost of inventories according to IAS 2.

Question

Answer

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Tags: Costs, IAS 2, Inventories
Level: Level 1

Topic: Accounting for Inventories (IAS 2)
Series: MAY 2016

Question Tag: Inventories

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FR – May 2024 – L2 – SA – Q6 – Inventory Accounting

Explains perpetual inventory system, differences in inventory counting, and disclosure requirements.

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FA – Nov 2020 – L1 – SB – Q1 – Financial Statements Preparation

Prepare the manufacturing account and the statement of profit or loss for a family business.

You're reporting an error for "FA – Nov 2020 – L1 – SB – Q1 – Financial Statements Preparation"

FA – May 2014 – L1 – SA – Q1c – Accounting for Inventories in Accordance with IAS 2

why (IAS 2) on inventories is not applicable to construction contracts

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FA – May 2014 – L1 – SA – Q1b – Accounting for Inventories in Accordance with IAS 2

costs to include and exclude when measuring inventory cost under IAS 2.

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FA – May 2014 – L1 – SA – Q1a – Accounting for Inventories in Accordance with IAS 2

Definition of inventories

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FA – May 2018 – L1 – SA – Q3 – Accounting for Inventories in Accordance with IAS 2

Identifies the items included in the cost of inventories.

You're reporting an error for "FA – May 2018 – L1 – SA – Q3 – Accounting for Inventories in Accordance with IAS 2"

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.

You're reporting an error for "FA – Nov 2022 – L1 – SB – Q5 – Accounting for Inventories (IAS 2)"

FA – May 2017 – L1 – SA – Q6 – Accounting for Inventories in Accordance with IAS 2

Deals with IAS 2 on inventories and the financial statements that pertain to it.

You're reporting an error for "FA – May 2017 – L1 – SA – Q6 – Accounting for Inventories in Accordance with IAS 2"

FA – May 2016 – L1 – SA – Q6 – Accounting for Inventories in Accordance with IAS 2

A question about the components that are part of the cost of inventories according to IAS 2.

You're reporting an error for "FA – May 2016 – L1 – SA – Q6 – Accounting for Inventories in Accordance with IAS 2"

FR – May 2024 – L2 – SA – Q6 – Inventory Accounting

Explains perpetual inventory system, differences in inventory counting, and disclosure requirements.

You're reporting an error for "FR – May 2024 – L2 – SA – Q6 – Inventory Accounting"

FA – Nov 2020 – L1 – SB – Q1 – Financial Statements Preparation

Prepare the manufacturing account and the statement of profit or loss for a family business.

You're reporting an error for "FA – Nov 2020 – L1 – SB – Q1 – Financial Statements Preparation"

FA – May 2014 – L1 – SA – Q1c – Accounting for Inventories in Accordance with IAS 2

why (IAS 2) on inventories is not applicable to construction contracts

You're reporting an error for "FA – May 2014 – L1 – SA – Q1c – Accounting for Inventories in Accordance with IAS 2"

FA – May 2014 – L1 – SA – Q1b – Accounting for Inventories in Accordance with IAS 2

costs to include and exclude when measuring inventory cost under IAS 2.

You're reporting an error for "FA – May 2014 – L1 – SA – Q1b – Accounting for Inventories in Accordance with IAS 2"

FA – May 2014 – L1 – SA – Q1a – Accounting for Inventories in Accordance with IAS 2

Definition of inventories

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FA – May 2018 – L1 – SA – Q3 – Accounting for Inventories in Accordance with IAS 2

Identifies the items included in the cost of inventories.

You're reporting an error for "FA – May 2018 – L1 – SA – Q3 – Accounting for Inventories in Accordance with IAS 2"

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.

You're reporting an error for "FA – Nov 2022 – L1 – SB – Q5 – Accounting for Inventories (IAS 2)"

FA – May 2017 – L1 – SA – Q6 – Accounting for Inventories in Accordance with IAS 2

Deals with IAS 2 on inventories and the financial statements that pertain to it.

You're reporting an error for "FA – May 2017 – L1 – SA – Q6 – Accounting for Inventories in Accordance with IAS 2"

FA – May 2016 – L1 – SA – Q6 – Accounting for Inventories in Accordance with IAS 2

A question about the components that are part of the cost of inventories according to IAS 2.

You're reporting an error for "FA – May 2016 – L1 – SA – Q6 – Accounting for Inventories in Accordance with IAS 2"

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