IAS 2- Inventories

Question 1

Inventories are assets which are:

Answer 1

• held for sale in the ordinary course of business
• in the course of construction
• in the form of materials or supplies to be consumed in the production process or in the rendering of services

Question 2

COS

Answer 2

Opening inventory + purchases - closing inventory

Question 3

According to IAS 2 inventories are to be stated at the lower of

Answer 3

• cost and net realisable value

- each asset must have a separate comparison

Question 4

Definition of cost

Answer 4

• all costs of purchase, costs of convention and other costs incurred in bringing the inventories to their present location and condition

Question 5

Methods of costing

Answer 5

• FIFO

- AVCO

Question 6

Net realisable value consists of

Answer 6

• the estimated proceeds from the sale of items of inventory less all further costs to completion and less all costs to be incurred in marketing, selling, and distributing the items

Question 7

NRV is likely to be lower than cost where there has been

Answer 7

• a large permanent reduction in the selling price
• an increase in costs which cannot be passed on to customers
• physical deterioration of inventories
• obsolescence of products
• errors in production or purchasing