Topic 11- Other standards IAS 2 Inventories

Question 1

According to IAS 2, how should inventories be measured

Answer 1

LOWER OF

• Cost
• Net realisable value ( Selling price - Selling cost)

Question 2

the cost of inventory is comprised of what category of cost

Answer 2

cost of purchase
cost of conversion
cost included in bringing the inventories to their present location and condition

Question 3

within cost, what kind of cost in relation of purchase is allowed to be included

Answer 3

Purchase price,
import duties,
irrecoverable taxes,
transport,
handling
other costs directly attributable to the acquisition of finished goods, materials and services.

Question 4

within cost, what kind of cost in relation of purchase is NOT allowed to be included

Answer 4

Both trade discounts and expected (probable) settlement discounts are deducted.

Question 5

within cost, what kind of cost in relation to conversion is allowed to be included

Answer 5

Costs directly related to the units of production such as direct labour

Question 6

within cost, what kind of cost in relation to conversion is NOT allowed to be included

Answer 6

Abnormal costs
storage costs
admin costs
selling cost

Question 7

Which three are alloewed to be included in the finished goods inventory

Marketing and selling OH
Variable prod OH
General mang OH
Factory mang OH allocated to production
Cost of delivering raw materials to factory
Abnormal increase in OH charges caued by unusally low production levels due to the exceptionally hot weath

Answer 7

Variable prod OH

Factory mang OH allocated to production

Cost of delivering raw materials to factory

Question 8

what cost is specifically excluded from the value of inventory,

Answer 8

Storage costs- they are incurred once the inventory is ready to be sold