International accounting standards 6

Question 1

accounts payable (znaczenie)

Answer 1

rachunki do zapłacenia

Question 2

Goods included in inventory (znaczenie)

Answer 2

towar ujęty w inwentarzu

Question 3

goods included in inventoryL

Answer 3

• A company recognizes inventory and accounts payable at the time it controls the asset.
• Passage of title is often used to determine control because the rights and obligations are established legally

Question 4

passage of title (znaczenie)

Answer 4

przeniesienie tytułu (prawa?)

Question 5

Special issues (examples)

Answer 5

• Goods in transit
• Consigned goods
• Sales with repurchase agreements
• Sales with rights of return

Question 6

consigned goods (znaczenie)

Answer 6

przekazane towary (z pokwitowaniem)

Question 7

sales with repurchase agreements (znaczenie)

Answer 7

sprzedaż z przyrzeczeniem odkupu

Question 8

Goods in transit:

Answer 8

• Purchased goods not yet received
• Sold goods not yet delivered
• Goods in transit should be included in the inventory of the company that has legal title to the goods.
• Legal title is determined by the
  terms of sale (e.g. FOB destination)

Question 9

Consigned goods:

Answer 9

• To hold the goods of other parties and try to sell the goods for them for a fee, but without taking ownership of the goods.
• Many car, boat, and antique dealers sell goods on consignment
• Until sold, goods are included in the inventory of the seller (consignor), not the middle-man (consignee)

Question 10

period costs (znaczenie)

Answer 10

koszty pośrednie produkcji

Question 11

Product costs (znaczenie)

Answer 11

Costs directly connected with bringing the goods to the buyer’s place of business and converting such goods to a salable condition.
Cost of purchase includes all of:
* The purchase price.
* Import duties and other taxes.
* Transportation costs.
* Handling costs directly related
to the acquisition of the goods

Question 12

Period costs:

Answer 12

Costs that are indirectly related to the acquisition or production of goods.

Question 13

Costs not included in inventory:

Answer 13

• abnormal waste
• storage costs (do not increased the cost of inventory)
• administrative overheads unrelated to production
• selling costs
• foreign exchange differences arising directly on the recent acquisition of inventories invoiced in a foreign currency
• interest cost when inventories are purchased with deferred settlement terms.

Question 14

Inventory costs (znaczenie)

Answer 14

koszty magazynowania

Question 15

storage costs (znaczenie)

Answer 15

koszty magazynowania

Question 16

Cost Flow Methods

Answer 16

metody przepływu kosztów

Question 17

Items that are not interchangeable

Answer 17

• specific costs are attributed to the specific individual items of inventory

Question 18

interchangeable (znaczenie)

Answer 18

zamienne

Question 19

Items that are interchangeable

Answer 19

• FIFO
• weighted average cost
• LIFO (forbidden in international accounting standards

Question 20

First-in, First-out

Answer 20

• Costs of earliest goods purchased are first to be
  recognized in determining cost of goods sold
• Often parallels actual physical flow of merchandise
• Companies determine cost of ending inventory by taking unit cost of most recent purchase and working backward until all units of inventory have been costed

Question 21

Avarage- cost

Answer 21

• Allocates cost of goods available for sale on basis of weighted- average unit cost incurred
• Applies weighted-average unit cost to units on hand to determine cost of ending inventory

Question 22

last-in, first-out

Answer 22

• Costs of latest goods purchased are first to be recognized in determining cost of goods sold
• Seldom coincides with actual physical flow of merchandise (Rzadko pokrywa się z rzeczywistym fizycznym przepływem towarów)
• Exceptions include goods stored in piles, such as coal or hay (siano)

Question 23

Balance sheet effects:

Answer 23

• A major advantage of the FIFO method is that in a period of inflation, costs allocated to ending inventory will approximate their current cost
• A shortcoming of the average-cost method is that in a period of inflation, costs allocated to ending inventory may be understated in terms of current cost

Question 24

Tax effects

Answer 24

• Both inventory and net income are higher when
  companies use FIFO in a period of inflation
• LiFo results in lower income taxes (because of lower net income) during times of rising prices
• Average-cost method results – in fact – the average
  numbers, between FiFo and LiFo

Question 25

Inventory Errors: common cause and effect

Answer 25

• Failure to count or price inventory correctly
• Not properly recognizing the transfer of legal title to goods in transit
• Errors affect both the income statement
  and the statement of financial position

Question 26

Cost of goods sold=

Answer 26

beginning inventory + cost of goods purchased - ending inventory = cost of goods sold

Question 27

Income Statement Effects:

Answer 27

• Inventory errors affect the computation of cost of goods sold and net income in two periods
• An error in ending inventory of current period will have a reverse effect on net income of next accounting period
• Over two years, total net income is correct because errors offset each other
• Ending inventory depends entirely on accuracy of taking and costing inventory

Question 28

computation of cost of goods cost (znaczenie)

Answer 28

kalkulacja kosztu własnego sprzedaży

Question 29

Statement Presentation:

Answer 29

• Statement of Financial Position - Inventory classified as current asset
• Income Statement - Cost of goods sold subtracted from (odjęty od) sales
• There also should be disclosure of (ujawnienie) major inventory classifications basis of accounting (cost or LCNRV) costing method (FIFO, or average-cost)

Question 30

write-off (znaczenie)

Answer 30

odpisanie wartości zapasów

Question 31

When the value of inventory is lower than its cost

Answer 31

• Companies must “write down”
  inventory to its net realizable value
• Net realizable value: Amount that company expects to realize (receive from the sale of inventory)
• Example of conservatism

Question 32

Inventory management is a double-edged sword:

Answer 32

• High Inventory Levels - may incur high carrying costs (e.g., investment, storage, insurance, obsolescence, and damage).
• Low Inventory Levels – may lead to stock-outs and lost sales

Question 33

stock- outs (znaczenie)

Answer 33

wyczerpanie

Question 34

Inventory turnover

Answer 34

Inventory turnover measures the number of times on average the inventory is sold during the period.
Inventory Turnover = Costs of goods sold/ average inventory

Question 35

Days in inventory

Answer 35

Days in inventory measures the average number of days inventory is held
Days in inventory = Days in year (365)/ inventory turnover