AC 7-8 Flashcards
What does inventory consist of?
Finished,WIP, material
Give formula for NRV
NRV= Revenue expected - Selling cost
How do you work out the worth of stock?
You calculate the lower of NRV and cost
What contributes to the cost aspect of inventory?
Cost is all the expenditure in bringing product to current state and location- material, delivery, direct cost
What happens if goods are stolen?
We use the lower of NRV and cost, however NRV is zero
What are the two ways of pricing?
GPM on sales= COS / rev (sales)
Markup on cost= rev ( sales)/ COS
What three things does capital expenditure include?
Price of purchase of NCA, delivery and legal fees
Essentially one time payments
Give the formula for depreciation
Depreciation= (cost of asset - residual value) / useful life
What is residual value?
Residual value is the amount the entity would obtain from disposal at the end of useful life.
Two methods of depreciation and give their formulas
Straight-line method: (cost - rv) / useful life = depreciation charge
Reducing balance method: x% x carrying amount = depreciation charge
What is the carrying amount?
The carrying amount is the original cost of the NCA - accumulated depreciation
Cost of NCA- accumulated depreciation
Give the formula for subsequent depreciation
Subsequent depreciation= (carrying amount at date - rv) / useful life
Give the formula for subsequent depreciation
Subsequent depreciation= (carrying amount at date - rv) / useful life
What is impairment?
Impairment is weak or diminished value and is identified if the carrying value is higher than the recoverable amount.
This means that the value of the asset is greater than the cash inflows
How is impairment calculated?
Compare carrying amount to recoverable amount
