Question

Round your answer to whole number

1. Inventories are assets held _____________; or

2. Inventories are __________of goods to be sold.

3. Inventory should be value at the lower of cost or _______.

Net realizable value is defined as Q4 less the Q5 less the Q6

Refer to the schedule above, fill in the blanks for Q4 - Q6

4. Q4: _________

5. Q5: _________

6. Q6: _________

Inventory is normally recorded at cost. However, due to obsolescence, price changes, damages, permanent fall in marketplace; the Q7. At this point, inventory would be recorded at its Q8.

Refer to the schedule above, fill in the blanks for Q7 – Q8

7. Q7:____________

8. Q8: ___________

9. Estimates of NRV are based on the __________available at the time the estimates are made, the amount of inventories are expected to realize.

KitchenStore Bhd (KSB) is a kitchenware company operating in Kedah. The company is in the process of preparing its annual financial statements for the year ended 31 December 2019. The relevant inventory costs and market data on 31 December 2019 is summarised in the schedule below: Item Quantity Cost per Unit (RM) Estimated Selling Price per unit (RM) Completion and Selling Cost per unit (RM) Plate 2,000 6.70 4.00 1.20 Bowl 1,500 8.30 5.20 0.70 Skillet 800 70.00 86.00 11.00 Assume the LCNRV is based on “individual-item” approach.

Refer to the schedule above, fill in the blanks for Q10– Q29. Please state ‘nil’ for zero amount.

10. Determine the NRV/unit for plate: RM_____________

11. Determine the NRV/unit for bowl: RM_____________

12. Determine the NRV/unit for skillet: RM____________

13. Determine the LCNRV for plate: RM_____________

14. Determine the LCNRV for bowl: RM______________

15. Determine the LCNRV for skillet: RM_____________

16. Determine the write-down value for plate: RM_____________

17. Determine the write-down value for bowl: RM_____________

18. Determine the write-down value for skillet: RM_____________

19. Determine the total LCNRV: RM_____________

20. Determine the total write-down amount: RM______________

Assume that KSB applies the Loss Method and the Allowance to Reduce Inventory to NRV Account to record the write down of the inventory.

21. What are the journal entries that KSB should record on 31 December 2019? Dr Loss of Inventory/Loss Due to Decline of Inventory to NRV RM__________ .

22. What are the journal entries that KSB should record on 31 December 2019? Cr____________ [Fill in the blank with the types of account and the amount. E.g. Rental RM20,000)]

Assume that KSB applies the COGS Method and the Inventory Account to record the write down of the inventory.

23. What are the journal entries that KSB should record on 31 December 2019? Dr____________. [Fill in the blank with the types of account and the amount. E.g. Rental RM20,000)]

24. What are the journal entries that KSB should record on 31 December 2019? Cr____________. [Fill in the blank with the types of account and the amount. E.g. Rental RM20,000)]

Assume that KSB applies the Loss Method and the Allowance to Reduce Inventory to NRV Account to record the write down of the inventory (For Q25-Q29).

25. When the inventories previously written down below cost no longer exist or when there is clear evidence of an increase in NRV, the_________.

26. Recovery of inventory loss should be limited to the_______. In other words, recovery of inventory loss should not be more than the previous loss recognized

27. Determine the amount of gain or loss that would be recorded by KSB if there is a credit balance of RM15,150 in the Allowance to Reduce Inventory to NRV Account. RM_________ [Indicate whether the amount is a loss or gain by stating a loss as (Dr Amount) or gain as (Cr Amount). E.g. Dr 1,000]

28. What are the journal entries that KSB should record on 31 December 2019 for the recovery of the inventory loss? Dr____________ [Fill in the blank with the types of account and the amount. E.g. Rental RM20,000)]

29. What are the journal entries that KSB should record on 31 December 2019 for the recovery of the inventory loss? Cr____________ [Fill in the blank with the types of account and the amount. E.g. Rental RM20,000)]

Answer 1

IAS 2 Inventories contains the requirements on how to account for most types of inventory. The standard requires inventories to be measured at the lower of cost and net realisable value (NRV) and outlines acceptable methods of determining cost, including specific identification (in some cases), first-in first-out (FIFO) and weighted average cost.IAS 2 Inventories contains the requirements on how to account for most types of inventory. The standard requires inventories to be measured at the lower of cost and net realisable value (NRV) and outlines acceptable methods of determining cost, including specific identification (in some cases), first-in first-out (FIFO) and weighted average cost.

IAS 2 Inventories contains the requirements on how to account for most types of inventory. The standard requires inventories to be measured at the lower of cost and net realisable value (NRV) and outlines acceptable methods of determining cost, including specific identification (in some cases), first-in first-out (FIFO) and weighted average cost.

Q1. Inventories are assets held for sale

Q2. Inventories are cost of goods to be sold

Q3. Inventories are valued at cost or net realisable value whichever is lower

In accordance with IAS 2 Inventories

NRV is the estimated selling price in the ordinary course of business, less the estimated cost of completion and the estimated costs necessary to make the sale.

Q4 Net realisable value is the estimated selling price in the ordinary course of business

Q5 Less: Estimated cost of completion

Q6. Less: Estimated costs necessary to make the sale.