Inventories

Question 1

Costs of inventory

Answer 1

• Costs included in inventory are any costs incurred to move inventory from purchased state to point of where it can be sold
• there is merchandise inventory (cost of purchase, shipping to received, import duties/taxes) and Manufacturing inventory (costs of conversion of raw materials, direct labor, manufacturing overhead)

Question 2

Cost flows of inventory

Answer 2

1) FIFO
2) weighted average

Question 3

Measure of Inventory

Answer 3

Measured at the lower of cost and NRV
- cost is all the costs to bring to state for sale
- NRV is the estimated SP in the course of ordinary business - estimated costs of completion and selling costs

Question 4

Inventories definition

Answer 4

Inventories are assets:
1) held for sale in ordinary business
2) in the process of production for such sale
3) materials/supplies to be consumed in the production or rendering of services

Question 5

Borrowing costs

Answer 5

• costs associated with the borrowing of funds to purchase inventories, and as mentioned above inventories are the cost of collective items
• IFRS requires capitalization
• ASPE choice to capitalize or expense