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1) International accounting standards are effective only if adopted by national regulatory bodies. Is this true or false? Why?
_______________________________________________________These questions’ answes below are FALSE but I don’t understand.
2a) When valuing work in progress, materials costs, labour costs and variable and fixed production overheads must be included.
b) Inventory items can be valued using either first in, first out (FIFO) or weighted average cost.
c) An entity’s financial statements must disclose the accounting policies used in measuring inventories.
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3) The inventory value on this date was $38,950. During the period from 30 June 20X6 to 7 July 20X6, the following took place:
Sales : $6,500
Purchases: $4,250
The mark up is 25% on cost.What is the inventory valuation at 30 June 20X6?
1) I would say this is true because they wouldn’t be international if they weren’t adopted.
2) Where are you seeing these as false? In the 2018 edition of the Kaplan Kit the Q asks which of 4 statements are correct – the other statement is “(1) Inventory should be value at the lower of cost, NRV and replacement cost”. The answer states that only (1) is incorrect. The three statements you have given are correct. Perhaps you are looking at an old edition with an error that has since been corrected.
3) You don’t say on what date the inventory value was $38,950 – but I assume 7 July 20X6. So what you have to do is work “backwards” to the year-end valuation, i.e.
Y/e value – sales (at cost) + purchases = $38,950
Therefore, Y/e value = $38,950 + sales (at cost) – purchases
You’re given the amount of purchases so the only tricky bit is working out the cost of the $6,500 sales. As the mark-up on cost was 25%, the cost must have been 100/125 x $6,500 = $5,200
So the answer is y/e value = $38,950 + $5,200 – $4,250 = $39,900
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