Inventory Accounting (IAS 2)

FR – May 2016 – L2 – Q6 – Inventory Accounting (IAS 2)

Calculate the working capital cycle and assess liquidity using specific ratios for Apapta Limited.

Question

The statement of financial position extract of Apapta Limited is given as follows:

	2015 (N’000)	2016 (N’000)
Inventories	3,950	3,250
Receivables	2,151	2,675
Investments (Marketable Securities)	430	375
Cash	565	–
	7,460	6,300
Payables amounts due within one year	(3,865)	(3,755)
	3,595	2,545

Payables are analysed as follows:

	2015 (N’000)	2016 (N’000)
Trade payables	2,600	2,215
Company Income Tax	695	820
Dividend payable	570	540
Bank overdraft	–	180
	3,865	3,755

Its profit or loss account extract is as follows:

Item	2015 (N’000)	2016 (N’000)
Sales	17,795	16,715
Cost of sales	(12,100)	(11,200)
Gross profit	5,695	5,515

Cost of sales is analysed as follows:

	2015 (N’000)	2016 (N’000)
Opening inventory	3,250	3,150
Add: Purchase	12,800	11,300
Less: Closing inventory	(3,950)	(3,250)
Cost of sales	12,100	11,200

In 2014 and 2015, credit sales were 83% of total sales.

Required:

a. Calculate the working capital cycle for 2015 and 2014. (9 Marks)

b. Compute the ratios listed below and comment on the company’s liquidity over the two years.

i. Cash ratio
ii. Current ratio
iii. Quick ratio (6 Marks)

Answer

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Level: Level 2

Topic: Inventory Accounting (IAS 2), Statement of Cash Flows (IAS 7)
Series: MAY 2016

AA – May 2017 – L2 – SA – Q4 – Inventory Accounting (IAS 2)

Examination of the importance of inventory and audit procedures for closing and work-in-progress inventory.

Question

For many businesses, inventory is one of the areas requiring most attention from the auditor.

You are required to:

(a) State FIVE reasons supportive of the importance of closing inventory to an Auditor. (5 Marks)
(b) Prepare a list of FIVE audit procedures relevant to ascertaining the cost of work-in-progress and finished goods. (5 Marks)
(c) State FIVE reasons why a physical count of inventory is important. (5 Marks)
(d) List FIVE reasons why the Auditor must be present at physical inventory count. (5 Marks)

Answer

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Tags: Audit Procedures, Finished Goods, Inventory, Physical Count, Work in Progress
Level: Level 2

Topic: Inventory Accounting (IAS 2)
Series: MAY 2017

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

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

FR – Nov 2014 – L2 – Q1 – Presentation of Financial Statements (IAS 1)

Analyze a trial balance to prepare financial statements, compute impairment, and adjust inventories for a corporate entity.

Question

The Trial Balance of Excellent Plc. as at 30 June 2014 is as follows:

The following notes are relevant:
i. Inventories as at 30/6/2013:

The net realisable values of these commodities per unit are as follows:

ii. Inventories on 30 June 2014 amounted to N9,000,000

iii. Prepaid salaries and wages were N10,000,000

iv. Included in the plant and machinery maintenance cost was depreciation of
N14,800,000.

v. The allowances for receivables are no longer required. The outstanding 10%
loan notes interest was paid on 30 June 2014 and this has not been accounted
for. The fair value of goods is N40,000,000 at the end of the year.

vi. The value in use of delivery van for the year 30 June 2014 is N31,000,000. The
prevailing market interest rate is 21% per annum and the Discounting Factor for
this year is 0.8264.

vii. The fair value of delivery van at an arm’s length transaction as at 30 June 2014
was N28,000,000 and the cost to sell was N2,000,000. All non-current assets
were depreciated at 10% per annum on reducing balance basis.

viii. Current tax provision for the year is N165,000,000.

Required:

a. Identify any FOUR of the cost items that are EXCLUDED in the valuation of inventories under IAS 2. (4 Marks)

b. Calculate the following:

(i) Value of opening inventories to be included in the Statement of Profit or Loss and Other Comprehensive Income. (2 Marks)
(ii) The present value in the use of delivery van (1 Mark)
(iii) The fair value and recoverable amount of delivery van (2 Marks)
(iv) The carrying amount and impairment if any on delivery van (2 Marks)

c. Prepare the Statement of Profit or Loss and Other Comprehensive Income (OCI) and Statement of Changes in Equity for the year ended 30 June 2014. (11 Marks)

d. Prepare the Statement of Financial Position as at 30 June 2014. (8 Marks)

Show all relevant workings

Answer

Find Related Questions by Tags, levels, etc.

Tags: Comprehensive Income, Depreciation, Financial Position, Impairment, Inventory Valuation, Trial Balance
Level: Level 2

Topic: Impairment of Assets (IAS 36), Inventory Accounting (IAS 2), Presentation of Financial Statements (IAS 1)
Series: NOV 2014

FR – Nov 2021 – L2 – Q3c – Inventory Accounting (IAS 2)

Enumerate the disclosure requirements for inventories under IAS 2 in financial statements.

Question

IAS 2 – Inventories sets out the requirements to be followed when accounting for inventories.

Required:
Enumerate seven disclosure requirements for inventories to be shown in the notes to the financial statements.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Statements, IAS 2, Inventory Disclosure, Notes to Financial Statements
Level: Level 2

Topic: Inventory Accounting (IAS 2)
Series: NOV 2021

FR – May 2016 – L2 – Q6 – Inventory Accounting (IAS 2)

Calculate the working capital cycle and assess liquidity using specific ratios for Apapta Limited.

Question

The statement of financial position extract of Apapta Limited is given as follows:

	2015 (N’000)	2016 (N’000)
Inventories	3,950	3,250
Receivables	2,151	2,675
Investments (Marketable Securities)	430	375
Cash	565	–
	7,460	6,300
Payables amounts due within one year	(3,865)	(3,755)
	3,595	2,545

Payables are analysed as follows:

	2015 (N’000)	2016 (N’000)
Trade payables	2,600	2,215
Company Income Tax	695	820
Dividend payable	570	540
Bank overdraft	–	180
	3,865	3,755

Its profit or loss account extract is as follows:

Item	2015 (N’000)	2016 (N’000)
Sales	17,795	16,715
Cost of sales	(12,100)	(11,200)
Gross profit	5,695	5,515

Cost of sales is analysed as follows:

	2015 (N’000)	2016 (N’000)
Opening inventory	3,250	3,150
Add: Purchase	12,800	11,300
Less: Closing inventory	(3,950)	(3,250)
Cost of sales	12,100	11,200

In 2014 and 2015, credit sales were 83% of total sales.

Required:

a. Calculate the working capital cycle for 2015 and 2014. (9 Marks)

b. Compute the ratios listed below and comment on the company’s liquidity over the two years.

i. Cash ratio
ii. Current ratio
iii. Quick ratio (6 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Level: Level 2

Topic: Inventory Accounting (IAS 2), Statement of Cash Flows (IAS 7)
Series: MAY 2016

AA – May 2017 – L2 – SA – Q4 – Inventory Accounting (IAS 2)

Examination of the importance of inventory and audit procedures for closing and work-in-progress inventory.

Question

For many businesses, inventory is one of the areas requiring most attention from the auditor.

You are required to:

(a) State FIVE reasons supportive of the importance of closing inventory to an Auditor. (5 Marks)
(b) Prepare a list of FIVE audit procedures relevant to ascertaining the cost of work-in-progress and finished goods. (5 Marks)
(c) State FIVE reasons why a physical count of inventory is important. (5 Marks)
(d) List FIVE reasons why the Auditor must be present at physical inventory count. (5 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Finished Goods, Inventory, Physical Count, Work in Progress
Level: Level 2

Topic: Inventory Accounting (IAS 2)
Series: MAY 2017

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

FR – Nov 2014 – L2 – Q1 – Presentation of Financial Statements (IAS 1)

Analyze a trial balance to prepare financial statements, compute impairment, and adjust inventories for a corporate entity.

Question

The Trial Balance of Excellent Plc. as at 30 June 2014 is as follows:

The following notes are relevant:
i. Inventories as at 30/6/2013:

The net realisable values of these commodities per unit are as follows:

ii. Inventories on 30 June 2014 amounted to N9,000,000

iii. Prepaid salaries and wages were N10,000,000

iv. Included in the plant and machinery maintenance cost was depreciation of
N14,800,000.

vi. The value in use of delivery van for the year 30 June 2014 is N31,000,000. The
prevailing market interest rate is 21% per annum and the Discounting Factor for
this year is 0.8264.

viii. Current tax provision for the year is N165,000,000.

Required:

a. Identify any FOUR of the cost items that are EXCLUDED in the valuation of inventories under IAS 2. (4 Marks)

b. Calculate the following:

(i) Value of opening inventories to be included in the Statement of Profit or Loss and Other Comprehensive Income. (2 Marks)
(ii) The present value in the use of delivery van (1 Mark)
(iii) The fair value and recoverable amount of delivery van (2 Marks)
(iv) The carrying amount and impairment if any on delivery van (2 Marks)

c. Prepare the Statement of Profit or Loss and Other Comprehensive Income (OCI) and Statement of Changes in Equity for the year ended 30 June 2014. (11 Marks)

d. Prepare the Statement of Financial Position as at 30 June 2014. (8 Marks)

Show all relevant workings

Answer

Find Related Questions by Tags, levels, etc.

Tags: Comprehensive Income, Depreciation, Financial Position, Impairment, Inventory Valuation, Trial Balance
Level: Level 2

Topic: Impairment of Assets (IAS 36), Inventory Accounting (IAS 2), Presentation of Financial Statements (IAS 1)
Series: NOV 2014

FR – Nov 2021 – L2 – Q3c – Inventory Accounting (IAS 2)

Enumerate the disclosure requirements for inventories under IAS 2 in financial statements.

Question

IAS 2 – Inventories sets out the requirements to be followed when accounting for inventories.

Required:
Enumerate seven disclosure requirements for inventories to be shown in the notes to the financial statements.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Statements, IAS 2, Inventory Disclosure, Notes to Financial Statements
Level: Level 2

Topic: Inventory Accounting (IAS 2)
Series: NOV 2021

Topic: Inventory Accounting (IAS 2)

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FR – May 2016 – L2 – Q6 – Inventory Accounting (IAS 2)

Calculate the working capital cycle and assess liquidity using specific ratios for Apapta Limited.

AA – May 2017 – L2 – SA – Q4 – Inventory Accounting (IAS 2)

Examination of the importance of inventory and audit procedures for closing and work-in-progress inventory.

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

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

FR – Nov 2014 – L2 – Q1 – Presentation of Financial Statements (IAS 1)

Analyze a trial balance to prepare financial statements, compute impairment, and adjust inventories for a corporate entity.

FR – Nov 2021 – L2 – Q3c – Inventory Accounting (IAS 2)

Enumerate the disclosure requirements for inventories under IAS 2 in financial statements.

FR – May 2016 – L2 – Q6 – Inventory Accounting (IAS 2)

Calculate the working capital cycle and assess liquidity using specific ratios for Apapta Limited.

AA – May 2017 – L2 – SA – Q4 – Inventory Accounting (IAS 2)

Examination of the importance of inventory and audit procedures for closing and work-in-progress inventory.

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

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

FR – Nov 2014 – L2 – Q1 – Presentation of Financial Statements (IAS 1)

Analyze a trial balance to prepare financial statements, compute impairment, and adjust inventories for a corporate entity.

FR – Nov 2021 – L2 – Q3c – Inventory Accounting (IAS 2)

Enumerate the disclosure requirements for inventories under IAS 2 in financial statements.

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FR – May 2016 – L2 – Q6 – Inventory Accounting (IAS 2)

Calculate the working capital cycle and assess liquidity using specific ratios for Apapta Limited.

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AA – May 2017 – L2 – SA – Q4 – Inventory Accounting (IAS 2)

Examination of the importance of inventory and audit procedures for closing and work-in-progress inventory.

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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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FR – Nov 2014 – L2 – Q1 – Presentation of Financial Statements (IAS 1)

Analyze a trial balance to prepare financial statements, compute impairment, and adjust inventories for a corporate entity.

You're reporting an error for "FR – Nov 2014 – L2 – Q1 – Presentation of Financial Statements (IAS 1)"

FR – Nov 2021 – L2 – Q3c – Inventory Accounting (IAS 2)

Enumerate the disclosure requirements for inventories under IAS 2 in financial statements.

You're reporting an error for "FR – Nov 2021 – L2 – Q3c – Inventory Accounting (IAS 2)"

FR – May 2016 – L2 – Q6 – Inventory Accounting (IAS 2)

Calculate the working capital cycle and assess liquidity using specific ratios for Apapta Limited.

You're reporting an error for "FR – May 2016 – L2 – Q6 – Inventory Accounting (IAS 2)"

AA – May 2017 – L2 – SA – Q4 – Inventory Accounting (IAS 2)

Examination of the importance of inventory and audit procedures for closing and work-in-progress inventory.

You're reporting an error for "AA – May 2017 – L2 – SA – Q4 – Inventory Accounting (IAS 2)"

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

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

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FR – Nov 2014 – L2 – Q1 – Presentation of Financial Statements (IAS 1)

Analyze a trial balance to prepare financial statements, compute impairment, and adjust inventories for a corporate entity.

You're reporting an error for "FR – Nov 2014 – L2 – Q1 – Presentation of Financial Statements (IAS 1)"

FR – Nov 2021 – L2 – Q3c – Inventory Accounting (IAS 2)

Enumerate the disclosure requirements for inventories under IAS 2 in financial statements.

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