Ch. 5 - Inventories

Question 1

Costs included in inventory - general rule

Answer 1

any cost incurred to move inventory from its purchased state to a point where it can be sold

Question 2

Costs typically included in merchandise inventory:

Answer 2

1. cost of purchase
2. shipping costs to receive items
3. import duties and other unrecoverable taxes

Question 3

Costs typically included in manufacturing inventory

Answer 3

1. raw material
2. direct labour
3. manufacturing overhead

Question 4

Manufacturing overhead includes costs such as

Answer 4

1. heat/electricity
2. depreciation on facility
3. insurance on facility
4. indirect factory labour

Question 5

Two accepted cost flow assumptions

Answer 5

1. FIFO

2. Weighted average

Question 6

Inventory is measured as:

Answer 6

lesser of cost or net realizable value

Question 7

net realizable value equals:

Answer 7

proceeds less selling costs

Question 8

ASPE differences (borrowing costs):

Answer 8

ASPE allows borrowing costs to be capitalized or expensed, while IFRS requires the capitalization of borrowing costs

Question 9

Inventory can be defined as assets:

Answer 9

1. held for sale in the ordinary course of business
2. in the process of production for a sale
3. in the form of materials or supplies to be used in the course of production