Inventory

Question 1

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Answer 1

Assets:

• held for sale in the normal trading period
• in process of production (WIP)
• material and supplies used in the production process

Question 2

Inventory is measured at the ________ of ______ and NRV

Answer 2

Inventory is measured at the lower of cost and NRV

Question 3

Inventory cost is purchase price, ________ and other _________

Answer 3

Inventory cost is purchase price, conversion cost and other directly attributable costs

Question 4

Purchase price includes:

Answer 4

Purchase price includes: purchase price less discounts and rebates, IRRECOVERABLE TAXES, import duties, transport and handling costs and other directly attributable costs

Question 5

Conversion cost includes:

Answer 5

Conversion cost includes material, labour, expenses and a portion of fixed and variable cost

Question 6

Which is not part of inventory cost and which is: abnormal waste, import duties, handling, storage, admin fees, recoverable taxes

Answer 6

Not part: abnormal waste, storage, admin and recoverable taxes. Part: import duties and handling

Question 7

5 principles of inventory
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Answer 7

• Cost formulas: FIFO/WAC: interchangeable goods, actual cost is for goods not interchangeable
• NRV is reassessed at the end of each reporting period and the most reliable estimate is selected
• when NRV is less than cost, there is a write-down
• when NRV is reassessed and there is need for a reversal, the reversal must not exceed the write down itself
• Conversion cost: material and supplies must not be written down when the finished goods would be sold at cost or above cost