Question

QUESTION 1 (IAS 2) (30) Part a According to IAS 2 Inventories the general rule for valuation of inventories is that inventories are valued at the lower of cost or net realisable value. The following information relates to an auto parts dealer in Gweru who hold inventory types A, B, C, and D Details | A Selling price of inventory per unit $8,000 Purchase price of inventory per unit $5,000 Value Added Tax $1,000 Agent's commission per unit $50 Transportation cost per unit $50 Import duties per unit $500 Number of inventory units held as closing 15,000 stock B $15,000 $7,000 $2,000 $30 $50 $1,000 2,000 C $10,000 $8,000 $3,000 $25 $50 $1,500 5,500 D $25,000 $15,000 $4,000 $70 $50 $2,000 100 Required: Determine the value to be reflected in the financial statements for the following types of inventory A, B, C and D (16)

Answer 1

			A	B	C	D
	N	Number of units in inventory	15000	2000	5500	100
	A	Selling Price per unit	$8,000	$15,000	$10,000	$25,000
	B	Purchase Price per unit	$5,000	$7,000	$8,000	$15,000
	C	Value added tax	$1,000	$2,000	$3,000	$4,000
	D=C/N	Value added tax per unit	$0.07	$1.00	$0.55	$40.00
	E	Agents commission per unit	$50	$30	$25	$70
	F	Transportation cost per unit	$50	$50	$50	$50
	G	Import duty per unit	$500	$1,000	$1,500	$2,000
	H=B+D+E+F+G	Total Cost per unit	$5,600.07	$8,081.00	$9,575.55	$17,160.00
	I=H*N	Value to be reflected in Financial Statement	$84,001,000	$16,162,000	$52,665,500	$1,716,000