会计英语 IAS2 Inventory

Example 2：suppose a company has three items of inventory. their cost and NRVs are nt of loss on write-down of inventory and the inventory value appears in the statement of financial position.
The journal entry required to recognize the loss and reduce the inventory amount is: DEBIT Loss on write-down of inventory (Expense) 300 CREDIT Inventory 300
2.
Methods of pricing inventories: 存货计价方法
3.
LIFO: Disallowed. IAS 2(revised) does not permit the use of LIFO.
AVCO (average weighted cost): average price of the components is changed as purchasing prices change.
250
10
9.5(w2) 9.5 9.5 250units × $9.5 = $2,375
250
300 (250) 50
2,500
2,850 (2,375) 475
Solution (b) AVCO periodic weighted average
Date Opening Receipt Issue balance Units Units Units 5 May 100 15 May 250 350 Unit cost $ 8 10 Total cost $ 800 2,500 3,300
Transactions during May 20x1 of LIXIN company are as follows:
Date Opening balance Units Opening balance 1st May 100 Receipt Units Issue Units Unit cost $ 6
5 May
10 May 15 May 25 May
100
150 250 250
8
10
How would issues and closing inventory be valued using FIFO and AVCO method in turn?
Solution: (a) FIFO
Date Opening balance Units Opening balance 1 May 100 Receipt Units Issue Units Unit cost $ 6 Cost of issue $
Key terms




LIFO (last in first out) 后进先出法 AVCO (average weighted cost) 加权平均 法 Periodic weighted average 周期加权平均 法 Continuous weighted average 连续加权平 均法 Net realizable value (NRV) 可变现净值 Cost of goods sold 销货成本
Purchase cost and pricing method (采购成本及计价方法）




IAS 2 regulate there are several cost should be included in the cost of inventory: Costs of purchase (incl. taxes, transport, and handling cost) less trade discounts received. Costs of convention (incl. fixed and variable manufacturing overheads). Other costs incurred in bringing the inventories to their present location and condition.
Units
$
6
$
Units
100 100 200
Value $
600 800 1,400 (1,050) 350
100 150
8 7(w1) 7 7 150units × $7 = $1,050
10 May
(150) 50
15 May
25 May Closing inventory 31 May
250
Methods of pricing inventories: 存货计价方法
1.
Specific identification method : assigned to each unit, which easily identified with a high unit cost, eg. Jewelers or antiques.
FIFO: used or sold in the order in which they are acquired. Inventory is stated with current costs in the statement of financial position. Limitation: previous cost against current revenue.
Formula for calculating cost of goods sold:
Inventory definition by IAS 2

②
①

Inventories are the assets which shown below in the ordinary course of business: Held for sale (finished goods) In the production process for sale (work in process) Materials or supplies③ to be consumed in the production process (raw materials)
Units $'000 $'000 $'000
Item
A B
in each item
5 5
Cost
5units × 17 = 85 5units × 8 = 40
NRV
79 45
Lower of cost and NRV
79 40
C
8
8units × 10 = 80
85
80
199 $6,000 $6,000
NRV = Selling Price - (Completion Costs + Selling Costs)

Example 1: LIXIN Company has 200 different items which had cost $40 each. These items were found to be defective at the balance sheet date. The cost of rectification after the balance sheet date is to be $1,500 , after which they could be sold for $50 each, with selling expenses totaling $800.
4.
Two possible methods of calculating AVCO


Continuous weighted average method : new unit cost of inventory is calculated whenever a new receipt of materials occurs. AVCO = Remaining inventory cost = Issues cost Periodic weighted average method: uses a simple average of the purchase prices paid during the period and it calculates the average costs of units receipt during an accounting period.
Solution:
Cost (200×40) Estimated selling price (200×50) Less further costs and expenses (1,500 + 800) Loss on write-down of inventory
$
$ 8,000
10,000 (2,300) 7,700 (NRV) 300
Accounting English
会计英语
Unit 8 IAS2 Inventories 存货
Key terms



Opening inventory 期初存货 Closing inventory 期末存货 Purchase cost 采购成本 Cost of convention 加工成本 Trade discount 商业折扣 Raw materials 原材料 Work in the process 半成品 Finished goods 完成产品 Specific identification 具体辨认法 FIFO (first in first out) 先进先出法
Double entry bookkeeping 复式记账法
Debit side Increase in: Asset (statement of financial position) Expense (income statement) Credit side Increase in: Liability (statement of financial position) Equity (statement of financial postion) Income (income statement)
Solution (b) AVCO continuous weighted average
Date Opening balance Receipt Issue Unit cost Cost of issue Balance
Units
Opening balance 1 May 5 May 100
Units
Total 205 209 DEBIT Loss on write-down of inventory (205,000 - 199,000) CREDIT Inventory Therefore, Answer for Q1 is $6,000, and for Q2 is $199,000
Cost of sales 销售成本
5 May
10 May
100
150
8
100units × $6 + 50units × $8 = $1,000 10 250 50units × $8 + 200units × $10 = $2,400
15 May 25 May
250
Closing inventory 31 May
50units × $10 = $500
$9.43 $471.5
The average cost during the period ($3,300 / 350units) The value of closing inventory ($9.43 × 50units)
Measurement of inventory 存货的计量

IAS2 states that inventories should be measured at the lower of COST and net realizable value (NRV).