.E xcel Professional Services, Inc.

Management Firm of Professional Review and Training Center (PRTC)

(LUZON) Manila 7339344 * Santiago City, Isabela (0918) 2807130
Calamba City, Laguria .. Da-smariiias City, Cavi te * Lipa City, Batangas (0917) 8852769
(VISAYAS) Bacolod City (034) 43 462 14 * Cebu City (032J 2537900 loc. 218 Since 1977
(MINDANAO) Cagayan De Oro City (091 7) 7081 465 * Davao City (082) 2250049

FAR lCNR\/
FAR.2802-Inventories (rO) 3)
cnA
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REVIEW OCAMPO/CABARLES/SOLIMAN/MOACYA2MOiJ
=
DISCUSSION PROBLEMS
. .
1. ,. Which statement i$' incorrect/ egarding Inventories_? · d. Included in inventory was merchandise received
a. Inventories areass-ets71eld for sale in the ordinary from Owl on December 31 with an invoice price -of
course of business, in the process c,f production for P156,300. The merchandise was shipped f.o.b
such sale, or in the form of materials or supplies to destination. The invoice, which has not yet
be consumed in the production process or in the arrived, has not been recorded.
rendering of services. / e. Not inclµded in inventory is e._ss·,400' of
b. Are meas1.,red , the lower of cost and net ·merchandise purchased from Oxygen~ stries.
realizable value. The merchandise was received on December 31
c. Are presented as a separate line item in the after the inventory had been counted. The invoice
statement of financial position . ./ was received and recorded on Decem~er 30.
@) Are presented in the statement of financial position f. Inc~ d in inventory was (t' 104,380 of inventory
either as cur~ or..flOnO:lffent: neld by Ovation on consignmen from Ovoid
Industries .
. 2. La Union Company included the follow ing items under g. Jrn;luded in inventory is merchandise sold to Kemp
inventories: f.o. b. shipping point. This merchandise was
_,.,",1aterials Pl ,400,000 ,. sh ipped after it was counted. The , invoice was
Advance ,for materials ordered •.i1, 'l. :' 1 ,, 200,000 \ prepared and recorded as a sale for P189,000 on
. ~,c
/ Goods in process · 650,000 / D.ecember 31. The cost of this merchandise was
Unexpired insurance on inventories 1;7•~_..1,. 601000 1' •,PlOS,200,Jand Kemp received the merchandise on
Adver.tising catalogs and shipping January 5.
boxes iu, fv., 1sa,ooo , ·,. h . ..f)Sfll:!9..fill from inventory was carton labeled
__. Finished goods in factory 2,000,000 ,,. "Please accept, for ~~it,.'.1 _ This carton contains
Finished goods in company-owned mercha,ndise costing (J>15,000'1which had been sold
retail stores, fncluding 50% profit to a customer for P25;000. No er1try had been
on cost 750,000 ';bvum~ . made to the books to ·reflect the return, but none
.Finished go·ods in hands of consigl')ees of the returned merchandise seemed damaged.
inclu·d·lng1f0°/o profit o·n.sales 400 ·ooo 111 11a:JJ., · , ·
, -· The adjustea inventory cost of Ovation Company at
· Finished· goods-in transit to .'customers, December 31 should be ·
shipped FOB destination, at· cost 250,000 ,,
Finished goods out -on approval, at
cost 100,000 ,,..
<v ,..a-, P2,217,620
P2,373,920
c. P2,396,320
, d. P2,411,320
Unsalable finished goods, at cost t,i·;r,(, 501000 '\
Office supplies 1,l'f~'Ui 40,ooo . . 4. The inventory on hand at December ,31 for Fair
Materials in transit shipped FOB
shipping point, .excluding freight of
Company valued at a c st of t~.f7
,80'q: The following
,terns were \not included in this ,nve-nto·ry amount:
P30,000 . 330,000
a. .P..u.cchase goods, in · trimsit, shipped ..£.QB
Goods...b.fild_on ,consignment, at sales
destination invoice price P32,000 which Included
price, cost PlS0,000 • 200,000 -.: freight charges of Pl,600 ..
Compute the amount to be presented as ''. Invento~ies" · b. Goods ~ _ t by Fair Company at a
under current assets. sales price of P28,000, Including sales commission
a. . PS,470,000 C. PS,650,000 · ' of 20% of the sales price. ·
@) PS,500,000 d. PS, 700,000 . c. Goods.2,0~ to Garcia Company, under terms FOB
~estination, invoiced for -?18,500 which includes
3. Ovation Company asks you to review Its December 31 P1,oqo ,freight charges to deliver th~ds .
Goods are in transit. 1r \W\) - t11, ' /?\vu - 1 '< • . rtwv
inventory values an9 prepare the necessary
adjustments to the books. The following inform,,tion is . d. Purchased go,.Q $:-lf\ tran'sit, • termL FO seller,
given to you. Invoice price ~~ freight cost, ,00
a. Ovation uses the periodic method of · .r.ecor.Qing e. Goods out Ol'I consignment to Man -Gom.pany,
inventory. A physical count reveals ~ - sales price P~6,400, shipp~·n'{J c o t of 2,000.
inventory on hand at December 31. 7wAA .:... 1'\ ~ "'""' -·
Ass1,1mlng that the company's e · g price is 140% oi
b. t i!Jorll1ded
l~o In the physical count of inventory is
inventory cost, the adjusted cost of Fair Company's
Pl 34 of merchandise purchased on December
inventory at De_cember 31 shou_ld b ~
1 from Standin$J , This merchandise was shipped
a. Pl,055,700 c. Pl,039,300
f.o.b . shipping point on December 29 and arrived
b. Pl,039,500 · . Pl,037, 300
In January . The invoice arrived and was recorded
on December 31. ·
c. JAf:~d In Inventory is merchandise sold to Oval
on December 30, f.o.b . destination. This 5. '.Nhlch ~tatement is (i~c; rre; t l regarding costs r,f
inventories? ~ - __...,,,,
merchandise was shipped after It was counted .
The invoice was prepared and recorded as a sale a. The cost of inventories should comprise all costs of
on account for P128,000 on DecEimber 31. The I ~urchase'. costs of conversion and other costs
merchandise cost P73, 500, and Oval received it on mcurred in bringing the inJ€ntories to their preser:
January 3. · location and condition . ,/
'''" ·• ,r,1u,1,t\ •r• •C( 1 · • ,,. i-, (." . ~ ·
- ,, •• ·~~·•vi t•. '

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EXCEL PROFESSIONAL SERVICES. INC.

b. 'irac\e discounts, rebates and other similar Items The entity Incurred the following -~dlJ)i.nistration _e~p~~ e~i
are deducted In determining the costs of purchase .✓ • Depreciation of the administration building = PS0,000
c. It mar be appropriate to Include non-production • Depre~latlon and maintenance of vehicles used by th e
overheads or the costs of designing products for administrative staff= PlS,000
specific customers in the cost of Inventories. 1/ • Salaries of the administration personnel = P305,000
d . . Foreign exchange differences . arising directly on Of the administration expenses 20 per cent are attributab1e
'--J the recent acquisition of Inventories Invoiced In a to administering the factory. · The rest of the
foreign currency are Included in cost of inventories . adm inistration expenses are attributable, in equal
proportion, to the sales and other non-production
6. Costs of purchase~ Include operations (eg financing, tax and corporate secretarial
a. Purchase price. v-' / . functions) . .!W..LJ4 1, 4u • •: , tlll _. e,\ • / ~ N ~n
b. Import duties and other non-refundable taxes .
c. Transport, handling and other costs directly The entity incurred the following selling expenses:
attributable, to the acquj ition of fin]shed goods, • Advertising costs = P30,000
materials and services. • Depreciation and maintenance of vehicles used by the
~ Fixed and variable manufacturing overheads. . sales staff = Pl0,000
• Salary of the administration personnel = P600,000
7. Costs of conversion do 'not include
a. Direct labor. ../ 9. The total costs of purchase is
b. Fixed factory overhead . ./ a. P3,747,000 .c. P4,100,000
( ~~) Variable factory overhead. /
V Direct materials. ·
b. P4,047 ,000 0 P4,249,000

10. The total costs of conversion is

8. :he fol!owi~ay be ~ in the cost of a. Pl,134,000 c. Pl ,060,000
inventqnes~ ~ J Pl,144,000 d. Pl,070,000
a., Administrative overheads ./ ..,, ,·r ,Y 1c• ( \ h. ,: f ll.(\ Ci,• n I\.} (I
b. Storage costs . ... ✓, t 1., ~-·r 1, r ,1,1·1 1- '1 · :·1 A~ 1C·, \·
·, ,, <l('((' .
c. Wastej/ materials, labor and ot'1er production 11. Buyer Co. regularly buys shirts from Vendor Company
costs . · 11- r-....·...:1 .
and is allowed trade discounts o.f 20% and 10% from
~ ) Selling costs. '/,..
the li st price. Buyer purchased shirts from Vendor on
May 27 and received an in'Joice with a 'list price of
Pl00,000 and__ payment terms 2/10, n/30. If Buyer
Use the following information for the next two questions:
uses the / net method _pf recording purchases, the
R_o~eena Corporation began operatiQns in the current year. Journal entr,r to record the payment on June 8 will
Duri ~g the year it i~curred the following expenditures in inclu de
h5urchasing matecialSJfor producing its pr.0.aook ; {b,·. A debit to Accounts payable of P72,000 .
'--::.;I A debit to Purchase Discounts Lost of Pl ,440. .
-.--Purchase price of raw m~t~i~!~, ~~~O,QQ_Q)
• Irppoi:t eu~ and other . o - purchase taxes c. A credit to Purchase Discounts of Pl,440 . .
- PS00,000 d. A credit to Cash of P70,560.
• 13,e u a e pt:.irchase taxes = PlOO,OOClt'
• Freight costs for bringing the goods from_!,. e supplier LECTURE NOTES:
to the f~ctory raw material storeroom = P.3'00,00 Trade and Cash Discounts
• Costs of unloadi11g, the materials into the raw material --, .
storeroom ~~QQ)_
• Packaging = ~ ·
Irl.ll tAih
Objective
.
Generate sales Encourage prompt
The entity r~ceivec( P53,00~vol.ume rebate from a supplier ·
payment
for purchasing mo~ than Pl,500,000 from the supplier
during the year. Accounting Not recorded Recorded using
The entity incu recl the following additional costs in the separately either Gross or Ne t
production run: , 1 (Purchases/Sales metho~
1·• Si ar-y---0.f the machine workers In the factory = net of trade
discount)
500,00 0t. . ~ --
• Sa ry of factorf supervisor = 300 o O\\ Gross and Net method of recordmg purchases
• Depreciation of the factory bu1 · ln-g..__,_and equipment
used for production process = ~ ..> O\l imll Mm
• ~onsum.ables used fn the production process = Cash Deducted from Deducted from
, P20,00o) 0 1-1 discounts purchases/cost of purchases/ cost OT
• bl!~atlon of vehicle used to · transport the goods
Inventory when inventory whether
fro~1 h_e.:~~~ rraterials storeroom to the machin•: floor taken taken or not
•
=~ 0~
Factory electricity usage, charges = ~
- -
, Cash Deducted from
----- --- ----
Not accounted f or
• Factory rental = 1'100,0_99 . discounts purchases/cost" of separat ely sine ('
• Depreciation and ·mai ntenance of the entity's vehicle taken Inventory (purchase already ,1educt eCl
used by tl,e fac:tory supervisor (50 per,. cent fo ~ offJ~~\ . discounts)
use and so per cent for personal u.,e) "" P20,~
Private use of the vehicle is an employee benefit._.
Cash
·- -
Included in
- - -- .. from purchtisc s
--. --,.,_
Reported ns 0t11
discounts purchases/cost of
nottakan expense
"11\,lfJ~ - f} I •J~j 11\ Inventory (pur ch,'l )e
t • ~,/' .. i'1,, ,,., , ~iii I
- ~ ~ ~
. -· ------- ~~
- I- discoun ts :,,,c,
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fr.-:-;Q • .:~-:'-.,1.. en.
• • 'I . i,~,
ROFESSIONAL SERVICES-, I~'':'-' -1 ~· y ; ( - ( ,.
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2- catapu It Corp. purchac·ed .
on credit for P200 . merchandise dJring the year 17. Assuming that perpetual inventory records are kept iP
000
gross liablllty exc~pt 'p terms 2/10, n/30. All of the pesos, the ending inventory on ~ ~'S'i S
discount period . Th 4 o,ooo was paid within the
a, Pl,900 ( c. P2,065
30-day term . At the remainder was pa id within the b. Pl, 920 a. P2, 100
perjod, 90% of th e end of .the annual accounting
18. Assum ing that perpetual inventory records are kept in
10% . remained i e _merchandise had t-een sold and
.mn·1ts ·only,l the ending inventory on an ~verage·-cost...,
beginnin I n inventory. The entity has no
,.,oJ.r'
~ 1!;"- - ----
record i'ngg nvehntory · The entity uses net method of
pure ases . a. Pl,980 · 1-t< , ,. • ir, c. Pl,970 I,,,
l_?•' Pl,956 d. Pl,995
If th e entity used the ~method of recording
purchases instead of the net method, the reported cost LECTURE NOTES: ' .~i ~ <II ' '-l e ·' l'-
of goods sold would have been --
a. The same c. Lc-wer by P72 0 Computation of the cost of ending inventory
. ti'.. Higher by P720 d. Pl 76,400
'- Specific identifica tion :
Units on hand x Specific Unit Cost
13. In accordance with the objective of PAS 2, a primary
j}sue in accounting for inventories is First-In, first-out method (FIFO)
( a.l The amount of ·cost to be recognized as an asset , Un its on hand x Unit Cost of latest purchases
V and car•ied forward until the related revenues are
recognized . Weighted Average
b. The cost formulas to be used to assign costs to
Units on hand x Weighted Average Unit Cost (WAUC)
inventories.
c. The measurement of inventories held by producers XfiAUC= Tota.Lcos_t --- ~-....
of Gi;S/,::otal units available for sale
.. - ~ - -
of a_g_cicultura l and forest Qroducts . ... : •.,., 1.' ' " ·,
d. The measurement of inventories held by Use the following information for the next two questions.
commodity broker-traders. - r ,... ,;:\ o.• fv "'' ;v,
~.. ,•1
Maximilian uses the perpetual inventory system .
14. Which statement is incorrect regarding' cost formulas? Maximilian's inventory transactions for the month of
a. An entity shall use the same cost formula for all August were as follows :
inventories having a similar_n .ature a-nd use to the Total
entity. / ---- -- No. Unit cost cost
b. For inventories with a .Q!ff__e__r:_e nt _ nature. or use, 01 Aug . Beg . inventory . 20 P4 .00 P80.00,
diff.e~-~ost.i9rm!!lctS_may be justified . 07 Aug . Purchases ~, ·. 10 4.20 42.00 / :er
C. Both a and ·b. 10 Aug. Purchases 20 4.30 86_.00 )
(?y Neither a nor b. 12 Ayg.,__Sales.____ 15 . ----'-- _?_ _ _ _ _ _i_
16 Aug. Purchases 20 4.60 ./ 92
15. The cost of inventories of items that are~ -llil.¥-- 20 Aug . Sales 40 ? ?
' ioterchangeable shall be ~ . .,.. 28 Aug . Sales returns 3 ?
1 a~ Specific identification of their individual costs1 , · : . '. ~- ,, . .. 1• ~1!1; ·t'it'"i 1·, , . . . ..:.~Q ;- ('"J;. ! ' ,r,~, •_'t: · ~, ... ,. ( ·1•r i : ( ' .

Y. First-in, first-out (FIFO) \_., ·_ ;1• , · 19. Using the information, assume that the Maximilian
c. Weighted average cost formula ,, .. , uses the f_Ifo--e::ost -flow method and that the sales
d. Any of these ., · returns relate to tlie20 August sales. The sales return
should be costed b~k into inventory at what unit cost?
16. Generally, which inventory -'osting method_ a. P4.00 .c~ P4.07
approximates mo,st closely the(@frent cQSbfor each of
the following?
b. P4.30 P4.60 . il:.
cost of goods sold Ending inventory ~ 20. Assu.ming that Maximili~es..!b____~erag;
{;). LIF.O FIFO ~ 1 " "" cost flow method, the 1 -'1ugus!) sales should be 4
'1(. LIFO LIFO \ l<>'•> \ o'dv.,•,i <••"' 0 ,:: \ costed at what unit cost? ----
c. FIFO · FIFO .,,.,, .d\
-:':~ \ '
_•· , •ns.•J__, /4 P4.16 ':.O~-q •til\1 c. P4.07
d. FIFO LIFO ~ b. P4 .30 d. P4.60

Use the following information for the next two questions. Use the following Information for the next two questions.
. -
Transact!ons for the month of June were: Orang Dampuan Co. wholesale_s bicycles : It uses the
Purchases Units Unit cost Total cost perpetual inventory system . The company's reporting date
June 1 (balance) 400 P.3.20 P 1,280 is December~ At Dece,!llbe.c 1, inven~r:y on hand
3 1,100 3.10 -3,410 ,so.o.s.lsted of 50 ~ a t ~ ) each and 4 bicycles at
1,980 ~ each. ing .the month of December, e followin g
7 600 3.30
15 900 3.40 3,060 inventory transactions took place (all purchase and sales
22 ~ 3.50 transactions are on credit):
--~
~ ;;:-- P-1.0,,,§Q.,.5 · Dec. 02 · Sold 300 bicycles for Pl,200 each.
~ 03 ~ bicycles were returned .by a customer.
June 2 300@ PS.SO 'rney had originally cost P820 each and were
6 800@ 5.50 sold for Pl,200 eai:h.
9 soo ·@ 5.50 09 Purchased .~blcycles at P910 each.
10 200@ 6.00 13 Purchased 76 bicycles at P960 each.
18 700@ 6.00 15 Sold 86 bicycles for Pl,350 each.
25 ~ @ 6.00 16 Returned one damaged bicycles to the
~§~..Q supplier. This bicycle had been purchased on
9 December.

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EXCEL PROFEss1o ·NAL StR-VfcEs, 1Nc.

22 Sold 60 bicycles for Pl,250 each . Ca. ! I, II, Ill and IV c. I and II only
26 Purchased 72 bicycles at P980 each. 'n.-" I, II and III only d. I , II and JV only
29 Two bicycles, sold on 22 December, were
returned bY. a customer. The bicycles were 26. The closing inventory at cost of a company amounted
, q , l~ill! , ( oa-dly damaged so it was decided to wnte to P284, 700 . The following ' items were i,CT-'.l.uded at
,~rt.. them or.rhey had originally cost P9 l0 each . co~ ,n the total : ''' ' " / - ,,;- , {, ,o"" ,,. . ,~1••
• \ 400 coats, which had cost PB0 each and normally
21. The~ t -~f goods soJd ' for the montl1 of December s old for PlS0 each. Owing to a defect ,n
using -m1'Ving-a.erage method is (Round unit costs to manufacture, they were all sold after the reporting
the nearest peso) ~~~qr, date at 50% of their normal price. Selling
a. P367,230 ,,111r) c. 1'366,320 expenses amounted to 5% of, t-he proceeds. .,
b. P365,410 ,~NJ ~ P372,725 •(. 800, skirts, which had cost P20 each. These too,
_&l!)-
JH'1~ were found to be defective. Remedial-wQ.l:k cos( PS
22. The cost of goods sold for the mont'1 of Decem ber per skirt and selling expenses for the batch totaled
ing FIFO method is /1"I "l' rq ,,., ( PS00 . They were sold for P28 each. tc,
W
-
1 ·ll'v .,_ \Ut,. 1,1 '- ~ l , ' ~ -, ~
P367,230 ,".,, ·f~l) , l ' 'll, , I C. P366,320 , · ,,,t
WhaCsfiould the inventory value be according 'to PAS 2
b. P365,410 7~ • 11'1> 0 ;,_,\"vc d. P372, 725
1~i~W ~
. (.
• \ I
' )
Inventories after considering the above items?
a. P281 ,200 1'1 ' , c. P282,800
SOLUTION FOR QUESTION #21 : ' ·-··--
11,, ..- ,"lu b. P282 , 100 d . P329,200
Unit
Qili
Dec. 1
Q§_c;r:jQ.ti.Qn
Balance
Units Cost Total Cost ·"-
393 823 323, 550
27. The fo llowing figures re late to inventory held at
Dec. 2 Sale (300) 823 ~ J !00) December 31 :
Sales
t i· ~ 'I / '-
Dec. 3 returns 5 823 L 11_5 Per Unit
Balance • Cost P10
98 823 80,765 General selling price 12.1 1
Dec. 9 Purchase 55 910 50,050 Selling price in a binding contract to sell 14
Dec. 13 Purchase 76 960 n 960 Quoted price in an active market for
Balance 229 890 203,775 similar asset 11
Dec. 15 Sale ( 86) 890 _ ( ("Zs 549 ) Estimated costs to sell 3
Balance 143 890 127,235 There were 10,000 units (including 2,000 held to satisfy
Purchase a bi nding contract to sell).
Dec. 16 returns ( 1) 910 _ _L__~_Q.L
Balance At what amount should the entity report the inventory
142 890 126,325
on its statement of financial position?
Dec. 22 Sale ( 60) 890 a. Pl00,000 fl . ) = q ! rN--- . ~- 11 ' C. P90,000
-~ ,40~)>
Balance 82 890 2';92 5 (ti) P 92,000 1 :.> • 1 ·'"' ~ ~ d. P84,000
Dec. 26 Purchase 72 980 70,560 J ~
Balance 154 932 143,485
28 . Which is correct · egarding write-down of inventory to
net realizab e va ue?
Sales, Dec. 2 P246,900
·sales returns, Dec. 3 a. Materials and other supplies held for use in the
( 4,115)
Sales, Dec. 15 76,540 production of inventories are _naL w;itten down
Sales, Dec. 22 below cost if the finished products in which they
~3.400
will be incorporated are exp~cted to be sold at or
Cost of goods sold m~ above cost. ✓ (2 Q)J\ er c-,,01< li:t' .
23. 1Which of the following i s ~ ~ b. When a decline in the price of materials indicates
~ n method used by an entity? that the cost of the finished produc;ts exceeds net
a. Cost of goods sold. realizable. value, the materials are written down to
b. Net income of the entity. net realizable value. In such circumstances the
c.· Amounts owed for income taxes. best ·available measure of the net realizable ~a(ue
~ Af'l'!ounts paid"to acquire merchandise. cc', of materials is the replacement cost. .., lc<i' ..,,,,,l,;L t
\Y Both a and b. Q ixt()J) ; ,:,. .. ..,,mu, c "I-' " , ,: •1,
. =---- d. Neither a nor b. \ 1
24. Which statement is (correct ) egarding net realizab le
li(I Ot.,_ "'1'1\' ((lsl-
value (NRI/)? •1R'I' E~r - Ecic.- H 1.S
a. NRV refers to the net amount that an entity 29, The following figures relate to inventory of materials
held at December 31 : · '
expects .to realize from the sale of invent ory in the ' ""
ordinary ~ourse of business. ~t,0 l : 1u Item X Item
b. NRV for inventories may not equal fair value less
costs to sell. ,,t• -
rr~•1 '(¥<,~1, Cost '2 11',
- P200,000 P400,00
(J_ Both a and b. fJ. n'), , (11 .,..,,, ~ ·
1f. Neither a ncir b. Replacement cost L 180,000 370,00
Estimated costs to convert
25. The cost of inventorle ~aynotbe r ecoverabl!? if materials into finished goods
- 100,000 200,00
I. The inventories are damaged ✓ .Jo Sf' c----- o_~
II. The inventories have become wholly or partially
obsolete / .J- Sp
Estimated selling price of
finished goods '1/0
, 320,000 610,00 o;l j"'
III. The selfing prices have declined ✓ J sr
IV. The estimated costs of completion c,r the estimated
Estimated costs to sell
L - 10,000 15,000- '.
costs to be incurred to make the sale have
increased . ✓ i' c The entity should recognize loss on write -d own ot
inventory of materials of ~a.ii ,().) • v(I) tu·

X 1
110 Ql) - ,ol-0): ~1100.>,
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 L PRCFESSIONAL SERV.ICES, INC.

a. PS0,000
~ - P30,000 C. PS,000 Total
Lot Number Selling price
d. Ni l
class of lots QlliQt clearing coili
30. The Refenjol Cor . . None
A 10 Pl,000,000 10 «,,1
unadjusted trial bpol ration included the foll owi ng in its
a ance as of December 31 : 8 20 800,000 Iv~, Pl,000,000
C 40 700 ,000 1,111 3,000,000
Ipnventor1, 1/1 P 19 450 000 8,000,000
D 50
urchases
Av-·i bl
' '
_127,850, 000 -60Q,Q.O~
The cost per lot of class B lots under the relative sales
)' \••'-
di a e for sale PJ1-2 3-Q0 0.0 0
Th · -= "'"'- -"""-- value method of invent ory valuation is
of \inventory _at December 31 was counted at a cost a. P674 285 ,,, lQ, <l"\l ' c. P602 380
.14 -~ million . This includes P500,000 of stow b. P610
f
,000
~J.tlV
·-r;--(C 1--
'
d. P560,000
;oving inventory that is ~ -me.d.JQ be sqlgJQu~t
J \ , , 1 ...

~ Of ~ QQ,QQQ, J» _vwr<t ~lt'ru.i 11 \ ,,,,, ., ,,\~

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The cost of sales fo r t he year is Use the follow ing information for the next two questions.
1, I\• "f n \I I
1 ,) J , L d,..,.< 't 1, •· ,, •h•'(n. 1 , • 1 't ,
a. Pl 33,100,000 r<l f l~"l '.1 c. P132,800,000 On November 15, 2019 Socrates enfered in to a
b,' ) Pl33,000,000 C ( ) ~ d. P132,600,000 comm itment to purchase 100,000 units of raw material X
_./ ..-2--- /\:, fo~ P40 per unit on March 15, 2020. Socrates entered into
IY ·, ,:::;.-
this pu(chase commitment to protect itself against th e
31. In accordance with PIC Q&A No. 2018-10 PAS 2 - volatility in the price of raw material X. By December 31,
ScoQe of discto~r< of inventory write-dn l/ills, an entity 2019, the purchase price of material X had fallen to 'p35
per un it. . 1 • (<' ·· ' , 1 , 10
ro n --
d should disclose
Write-down s of i nventory @ 9Ltbe_...fr.1_Q___Qf_Jbe
.l'.~M!Jod .
t
r, ,

35 . How much will be recognized as loss on purchase

"I ' t - l••.

b. Write-downs re pre~ .i!!iO.g ~ e~ elow cost during commitment on March 15, 2020 if the price of the
the reporting period. · --::--- · ,n, :. •:· material had fallen further to P32 per unit?
c. Both a and b. , , , J • , ,: ,, a. Pl,600,000 "i> ,i. , ~, , c. P600,000
d. Neithe r a nor b. ' _.tf. b. Pl,000,000 d. P 0
f i
36. How much will be recognized as gain on purchase
32 . Whic~ statemerit is ._fncorr ect )rega rding ~ L Qf commitment on March 15, 2020 if the price of the
j_mtentory....mJte-down to net realizable value? material had risen to P42- per unit?
a. If the selling pnce of inventory that has been a. P2,ooo,ooo 1, , m. c. P40o,6oo
·written down to net realizable value in a prior ;j,:') Pl,b00,000 fV l••• i f/, d. P 0
period, subsequently recovers, the previous '-J f,I ' I.I

amount of the write-down cao be revers.e.p . ✓

b. The r.eversal is ..J.i!f!!ted to tlie · amou·nt bf the · 37 . On January 1, 2020, Pastille Corp. signed a three-year
origina l write-down . ✓ · noncancelable purchase Gol'l!:act, which allows Pastille
c. The amount of any reversal of any write -down of to purchase up . t oC5.0.9.,000 ~nits of a computer part
inventories, · arising from an increase in net annually from Pyramici :SU-ppfy Co. a(l.!Q),er unit and
real izable value, shall be recog ~iz_eq_ ~s_a req_u ction
in_ tb.e_ aJ ! l ~ r ~s_r.e.c9grtl.i:t!Q as an
,,.-, expense in the period in which the reversal occurs. ,
units. During 2020, the
obsolete . . Pastille had_250 0
s
guarantees a minimum annual purchase of lfil),.0.0.0
•unexpectedly became
units of this inventory
1d . .' None, all the statements are correct. at December 31, 20~0~ d believes these parts ca n
J be sold as scrap fo~ er unit. What amount of
33 . At the end of t he reporting period, the balance of probable loss from the purchase. commitme.nt should
inventory account of an entity ·was P502,000 . The Pastille report in its 2020 profit .or Ja~?
: balance of the allowance for inventory ~-rite-down was a. P2,400,000 10 - ;_ ·· ,'I rw 'c..1 Pl ,600,000
• ~ I (tJ
P33,000. The inventory cost and other data are as b. P2,000,000 . ~ d. P 800,000
foilows: (amounts ir:1 thousands) AI0'1J(;J\l!fLYlfll ·'-'O ,:t,;, _ •~ ll'N "t. , lt., l'J \rN
Replace C,air tlf, r' <tll~\ ~ ·~
N · 38. Which is no a ~.11ired djsclos~ for inventories in
ment · SaIes orma 1
accordanc with PAS 2? · ·
Item.' Cost Cost Prke ~, - · Pro~t a. fnventory costing methods employed. ✓
:
c
P· ~!
_~
P ~~ P ~~ P · ~ b. Inventory compositipn. /
j, Inventory finan_
cing arrangemer,ts.
/ .
.
1 135 129 1 10 1
.D _(igl ill ~ .l 7 &
...2.Q Inventory location.
Total ~ ~ f.~ f'.•L®. _e~ 39 . Which is r;:;-;;~ a required disclosure for inventories in
t i~ n '
t•N t Ill t lj '/i'(X)U accordan~ th PAS 2?
The amount to be recognized as rev.e) rscil of inventory a. The carrying amount of. inventories carried at fa ir
write down is SOUJOO · ( • sino:,o value less costs to sell ✓ o;,d ~ o.,1 rr:,d ' ! t,,,,, n 1 ' 1,
a. P33,000 ( }~0001 ,t.~ ld :,( PB,OO~ ~ b. The amount of inventories recognized as an
b. Pll,000 41Dqcm - o·H ro,;: P ~ g. l ~'.O} expense during the period /
rq,o•f<d . Or . ~ c. The circumstances or events that led to the
34 . Caravana Developm~nt- Corpora.tion bought ~ . lO ,..,1,11{1 , reversal of a write-down of inventories I ,·~·, o\ ; >'-'
hectare land in .Novahches, to be improved, subd1v1ded . rct.'1
The fair value of inventories '. 1 . -., ·,
. into lots, aru!_ evenJl.!~lly sold. Purchase pnce of the
land was P58,0Q..O,QOO . •, Taxes and oocumei:itation •
v Nf:.1/

expenses on the transfer of the property amounted to - now do ~he DIV drill -
PSQ0,000 . The lots were classified as follows :

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EXCEL PROFESSION,A,l SERVICES, ·1NC.

DO-IT-YOURSELF (DIV) DRILL

1. PAS 2 (Inventories) a,nplies to~ inventories, ~ s. Sk yfa ll Co . records purchases at net amo.unts . On May
a. Financial instruments s Skyfa ll purchased merchand ise on account, P32 ,000,
b. -Biological assets related to agricultural activity· and te rms 2/ 10, n/3 0. Skyfall returned P2 ,000 of the May
agriculr.ural produce at the point of J-arv-est 5 p_u rchase and received cred it on account. At May 3 1
(;,J Both a and b t he balance had not been paid.
Y. Neither a no r b By how much should the accou nt payable be adjusted
o.n May 317
_,.a ., P600 · 11 • ' 1 I l ,l l l c. P680
2. .e8L2 does ( r1ot) .al2e!Y to the mEiasu re ment of ( It )
~ - P640 /(I , I/ d. P 0
inventories held1lf t.
a. Pro.ducers of agricultural and fo rest produ cts,
Use the following information for the next t wo questions.
agricultural produce after harvest, and mineral s
and mineral products, to the extent that they are Mille r Inc. is a wholesaler of office supplies . The activity
measured at net real izable value in accordance for Mod el III ca lcu lators du ri ng August is shown below :
with well-established practices in those industrie s.'
Balance/
b. Commodity broker-traders who measu re the ir
Date Transa ction Units Cost
inventories at fair value less costs to sell. /
Aug . 1 Inventory 2,000 1 P36 .00 '
(c). Both a and b. 7 Purchase 3,000 37 .20 H .
'-6. Neither a nor b. 12 Sales 3,600
21 Purchase 4,800 38 .00 It I
22 Sales J,80.Q
3. The Alcala Company counted its ending inventory on
December 31. None of the follow ing items were
29 Purchase 1,600 38.60 w t
I, l , ·:,(i'; i'~O
~ d when the total amount of the company 's 6. If Miller Inc. uses a FIFO perpetual inventory system ,
ending Inventory was computed : • t he endjng ~nveotory of Model Ill calculators at August
• PlS0,000 in goods located in Alcala's ware J-iouse 31 is reported as
\ tt:laU 1.r:.e on consig.1 ment from another compa ny. a. P152,288 1 c. PlS0,080
• ._e200,0i'.l~ in goods that were ~ b y Alca la and
shi pped on December 30 and were, in transit on
e- .
P1s2,96o ,~. d. PlS0, 160
, r 11,,

December 31; the goods were received by the 7. If Miller Inc. uses a (weign tetr-aVerage-eost) period ic
customer on January 2. Terms were FOB inventory system , the ending inventory ·of ·Model III
De_stinati,on . - calcu lators at August 31 is reported as·-
• 1):300,000 in goods were ~ a and ~.. PlS0,080 . ·. 1
1,\
c. PlS0 , 160
snlppeef on December 30 and were in trans it on b. Pl52,960 - -;;.- d. P146,400
/(t> (1'!''
December 31; the goods were received by Alcala
on January 2. Terms were E.QB sb ipplng..pGi.A.t. st The following information was avail~ble from th e
• P400~000 in goods were sold by Alca la and sh ipped invent ory records of Breakaway Company for January :
on December 30 and were In transit on December Units Unit Cost
31; the go·ods were received by the customer on Balance at January 1 3,000 P9 .77
January ·2. Terms were FOB shipping point. Purchases :
The company's ?!l?ofted"- inventory (before any January 6 2,000 10.30
corrections) was R ,000,000. Wh·at is the correct January 26 2,700 10.71
amount of the com pan inventory on December 317 Sales :
a. P2 ,550,000 @ P2,SOO,OOO January 7 2,s·oo
b. Pl,950,0_ 00 d. P2,?00 ,qoo January 31 3,200
Assum ing that Breakaway maintains perpetual
inventory records, what should be the lnv,ento at
4. In its statement of financial position, Mary I Mfg. Co . January 31 , using tile mpvln- =°ave rage invento
has an Inventory in the amount of Pl 7p,OOO wh ich method , rou nded to the nea rest pes.o .
consists of: a. P20,47 4 . P20, 720 (j)
Direct materials PSS, OOO J b. P20,520 d. P21, 0 10
Direct materialp purchases In transit, T
FOB destination 12,000
Direct materials purchases In transit, 9. Yontabal Compa ny sta rted operations in 201 8. The
' FOB shippi ng point 9,000 \..
Prepaid Insurance on inventory
Work-In-process
2,000
38,000 4
fo llowing data are abstracted from the company's
production and sales record s: 'lu ~ 1 t, t, . \
4,5,000 -" 2018 2.Ql2 , • , ,2Qf0
Finished goods Nu mber of units 10 , r • \'fr"
Goods shipped on consignment, at selling produced 240,0~0 llv 232,500 20 2,500 , ~"J{ ·
price with 20% profit on sales 15,000ll.1-0)
1l t Number of units
Mary I Mfg . Co . should report inventory In its sold 150 ,000 217,500 195,000 : ::1\,1~.,)

statement of financial posit ion at Unit production

a. P162 , 500 (c). . P159,000 cost 4.50 5.20 5.80
b. P150,000 'c(. Pl 59, 500 Sales revenue 1,200,000 1,800,000 1,950,000
Using the FIFO cost flow ·assu mption, the gross prot,t
for th e year ended December 3 1, 2020 Is
A, PSl 9,000 { 11. c. P1,068, 000
lg} P882, 000 hf 1, d, Pl,0 72,500
~

www.prtc.com.ph ~
·-..
I 'I ll
~

FAR.2802
 <:EL PROFESSIONAL SERVICES, INC .

10. A _companv decided to . .

method from FIFO to· Lcha~ge its 1nvento~y val~a-~ 13. The amount of inventories recognized as an ~ se
What was t h e r ~ in a period ofq 1~.£._r!_s.es. during the period, which is often referred to as~
O ~ consi sts of
and net income . th t e change on ending inventory
Endl . in e~year of the change? a. Those costs ,pr-e.1tio11sly_i!J_cl.u.d_(W_ in_ ~e
a. ~g inv~l}tQry Net income measurement of .i.W,e_ri!Q!_y that has -Ao.wJiegn...sold .
· ncrease Increase · b. Unallocated production i:,~ ads. -~
b. Increase Decrease c. Abnormal amounts of production costs of
~:~ Decrease
Decrease
Decrease
Increase
Tiiventories .
, d. All of the above .
..__
l 1. When an inventory costing formula ii; changed , th e 14. Which statement is ~;,!'_i::~ regarding ~ o n of
change is required to be applied : l.DY£!lt.o.r.@.~ ~se?
a. Prospectively and the adjustment taken t hro ugh a. When inventories are sold, the carrying amount of
the current profit or loss. those inventories shall be recognized .as an
'61 Retrospectively and the adjustment taken through expense in the period in which the related revenue
is recognized.
the opening balance of accumulated profits .
c. Prospective ly and the current period adjustment b. The amount of any write-down of inventories to
recognized directly in equity . net realizable value and all losses of inventories
d. Retrospectively and the adjustment recognized as shall be recognized as, an expense in the period th e
an extraordinary gain or loss. write -down or loss occurs.
c. The amount of any reversal of any w·r ite -down of
12. At the beginning of t he year, Anda Realty embarked on inventories, arising from an increase in net
a real estate development project involving single real iza ble value, shal l be recognized as a reduction
family dwellings. . Anda realty purchased a track of in the amount of inventories recognized as an
land fqr PG0,000,000. Anda incurred additional cost of expense in the period in which the reversal occurs.
Pl0,000 ,000 in preparing the land for sale . Details of d. Inventories allocated to another asset ( example,
the project follow : self-constructed PPE) are recognized as an

, Subdivision Sales price

expense at the end of the useful life of that asset.

Phase Number of lots ~ 15. If a material amount of inventory has been ordergd
1 100 400,000 thr~ ~ at the statement of
2 200 . 300,000 · )'lJiancial position date fgr fl.!ture delive~ firm prices,
3 400 250,000 ( a~) This fact must be disclosed. ·
· What amount cf cost should be allo7?ted Phase 1 lots? Y. Disclosure is required only if prices have declined
a. P~2,900,ooo , . Cs) p1~,ooo;o.oo since the date of the order.
b. P4o,ooo,ooo · d> P2-i;ooo,ooo ' c. Disclosure is required only, .i f prices have since
risen substantially .
.d. An appropriation of retained earnings is necessar,y .

- done -

ILLUSTRATIVE PROBLEM
Cost flow assumptlQns
The following information has been extracted from the records of Praktis Corporation about one of Its products.
. I ' .
Qm ~ of Units Unit Cost Total Cost
January 1 Beginning balance c(6® P14 .00 P22,400
JanUcjry 6 Purchased ~ 14.10 8,460
February 5 Sold@ P24.00 per unit 2,000
March 19 Purchased <Z2QD> 14.70 32,340
March 24 Purchase. returns (1 60'\ 14.70 ( 2,352)
April 10 Sold. @ P24 .20 per unit 1,400

~
June 22 Purchased 15 .00 252,000
July 31 Sold .@ P26.50 per unit
August 4 · Sales returns@ P26.50 per unit 40
September 4 Sold@ P27. 00 per unit 7,000
November 15 Purchased ;1:;0QP> 16.0.0 16,000
December 28 Sold @ P30 .00 per unit ~
11AJ~ O
REQUIRED:
Compute for t he ~losing inventory under each of the following pricing methods? (Round unit costs to two decimal places.)
1. FIFO - Penod1c . 3. Weighted average - Periodic
2. FIFO - Perpetual 4. Weighted average.-= Perpetual (Moving average)

SOLUTION:

FIFO - Periodic
Fr-om 'November 15 purchases (1,000 un its x Pl 6.00) - P16,000
From June 22 purchases (880 units x Pl 5.00) - U2_QQ
Total P29,200

Page 7 of 9 www.prtc.com.ph FAR.2802

EXCEL PROFESSIONAL SERVICES. INC.

FIFO - Perpetual
Pu rchased ~ old Balance
Unit Un it Un it
Un its ~ Total Cost Units r ost Total Cost Un its Cost Total Cost
Jan . 1 1 600 14 .00 22 400
Jan . 6 600 14 ,10 8 ,460 1,600 14 .00 22,400
600 14 .10 8,460
2 200 30 860
Feb. 5 1,600 14 .00 22,4 00
400 14 .10 5,64 0 200 14 .10 2,820
Ma r. 19 2,200 14.70 32 ,340 200 14 .10 2,820
2,2 00 14 .70 J 2,34Q
2 400 35 160
Mar. 24 (160) 14 .70 (2,3 52) 200 14.10 2, 820
.lMQ 14 .70 29,988
2 240 32 808
Apr. 10 200 14 .10 2,820
1 200 14 .70 17,640 840 14.70 12,348
Jun . 22 16,800 1s .oo· 252,000 840 14 .70 12,348
16,800 15 .00 252,000
17 640 264 348
Jul. 31 '840 14 .7 0 12,348
2, 760 15.00 4 1,400 14,040 15 .00 210,600
Au . 4 (1Ql 15 .00 (600) 14,080 15.00 211 ,200 .
Seg. 4 7,000 15 .00 · 105,000 7,080 15 .00 106,200
Nov . 15 1,000 16.00 16,000 7,080 15 .00 106,200
__LQQQ 16 .00 16,000
8 080 122 200
Dec. 28 6, 200 15 .00 93 ,000 880 15 .00 13,200
1,000 16 .00 16,000
. lJl80 -291200

Average - Periodic
Total cost (1,8~0 units x Pl4.92) P28.050

Weighted average uoit cost (P328,848/22,04 0 un its) - P14. 92

Average - Perpetual ( Moving average)

Puri;;haseg 2Q!Q. Balance
Unit Un it Unit
Un it5 Cost Total Cost Units Cost Total CQst Units Cost Total CQ~t
Jan. 1 1 600 14.00 22 400
Jan . 6 ·600 14.10 8,460 1,600 14 .00 22,400
600 14 .10 8,4§0
2 200 14 .03 30 860
Feb. 5 2,000 14 .03 28,060 200 14 .03 2,800
Mar. i9 2,200 14 .70 32 ,340 200 14 .03 2, 800
__LlQQ. 14 ,70 32, 340.
2 400 14 .64 35 140
(160 ) 14.70 (2 ,3 52) 200 14 .03 2, 800
Ma r. 24
2JMQ 14 .70 22 ,98e
2,240 14 .64 32,788
1,400 14.64 20A96 '840 14 .64 12, 292
AQr. 10 840 14 .64 12,292
16,800 15 .00 252 ,000
Jun . 2 2
16,800 15. 00 ~,QQ_Q
17,640 14 .98 264 ,292
3 600 14 .98 53,928 14,040 14.98 210 ,364
Jul. 3 1 _(40) 14 .98 (599 ) 14,080 14 .98 21 0,963
- Aug . 4 7,000 14 .98 104,860 7,080 14 .98 106,103
SeQ. 4 7,080 14.98 106,103
1,000 16 .00 16,00 0
Nov . 16 __LQQQ 16 .00 _lQ._Q_Q_Q
8,080 15.11 _ _122 , 103 _
93,682 1,880 15JJ. ----- 28 ,4 ~!_
6 ,200 -12.1.L
- done·

FAR,2802
-::;-~. nrtc .com.&11
 'CEL PROFESSIONAL SERVICES, INC.

LECTURE NOTES
SUMMARY OF PAS 2 INVENTORIES . - . . d- ectly on t he
• fore ign exchange differences arising ir .
Objective of PAS 2 recent acquisition of inventories invoiced in a forei gn
currency - -h
The ~ j_e_ctlve~))f PAS 2 ·
• interest cost when inventories are purchasE!d wit
treatment for . . is to e.re~~! i~_e_the .accountlllg
~ e n t oo es~ It provides guidance for deferred settlement terms.
~!l!llil the cost of inventories_and for subseg.Y.IBt Lv.
reef 90ISing...an.._eiqi.ense, ios;[u ding any write-down . to- net The standard cost and retail methods may be used for
rea 1sable I I - -- !J.J.> _ _
the measurement of cost, provided that the results_
f- - - - va ue. t also provides guidance on the i:ost
ormulas that are used to assign costs to inventories. approx imate actual cost. [PAS 2.21 -22]

Scope For inventory items that are (not interch a;:;-geable,

...SP.e..cific costs are attributed to the ~ pecJfiLlndivi_!:!uai
Inventories -i.n.cl ~d~'assets h.eld-for s ale-irLtb.e _ordJoa_ry items of inventory . [PAS 2.23]
.coucs.e__oLbusinesJ (fin ished goods) , ~ ts__irL the
l)rQdu~_
tiq_n _ pJ oc~ss for sale In the ordinary course of For items that are j nter_cha~geab)e, PAS 2 allows t he
business ( work in process), and_mate.rlaj_Lan.d...fil!P~lies FIFO or_ w_ei_ghted average c0st- formul as. [PAS 2.25]
th~ are consumed in production (raw materials) . [PAS The IJKO formu la, which had been allowed prior to t he
2.6) -- 2003 rev ision of PAS 2, is no longer allowed .
However, PAS 2 excludes certain inventories from its The same cost formula should be used for all inventories
scope : [PAS ·2 .2) with -similar characteristics as to their nature and use to
financial instruments (see PFRS 9) the entity. For groups of inventories that have different
biolog jcal assets related to agricultural activity and characteristics, different cost formulas may be justified.
agricultural produce at the point of har,est (see PAS [PAS 2.25]
41).
Write-Down to Net Realisable Value
Also, while the fol lowing are within the scope of the
standard, PAS 2 does not apply to the measurement of •~ ~ s the estimated selling P,rice in the ordinary course
inventories held by : [PAS 2.3] of business: ~i ;s~ t he: ii t tmateg_ CQSJ .9Lcompletion(iri'd')
• producers of agricultural and forest products, the estimated - costs l'},e_cessary to make -1he. sale, [!AS
agricultural produce after harvest, and minerals and 2.6] Any -write:.d.o.wn .to NRV should be r.eG091:usecL as..an
mineral products, to the extent that they are expeAse- iA the period in w_hich the write-down occurs.
measured at net realisable value (above or below An ~ __,.should be cecognis~-1n....t b ~ m e
cost) in 'accordance ·with well-established practices in tW.eroeo t in the period in which the reversal occurs .
those industries. When · such lnventories are [PAS 2.34]
measured at net realisable value, changes in that
value are recognised in profit or loss in the period of Expense Recogr,ltion
the change. ~ ~~ PFRS 15 addresses revenue recognition. Whe~
• commodity brokers and dealers who. measure t heir
i!:!Y!!nt.Qri.e.L clr~ --~old and r~'!_~n_ue is recog~i~ed, t he
inventories at fa!r value less_costs to sell. When such
~ -.am.QJJil.Lof those inventaries:ls rec6gnise<1 as an
inventories are measured at fa ir value less costs to
,@ efie:> (often called .CQ.S.t:.o.f:grut~.:,WQ). Any ~ -
sell, changes in fair value less costs to sell are
down to NR\L a~ ' l Y inventory losses_ are alsc•
recognised in profit or loss in the period of the
recognised as a~ ose :When th~y occur. [PAS 2.34)
change ... ~v l<A1 Co9. ro ,e., - . --:--
Disclosure
Fundamental Principle of PAS 2
C osu re [PAS 2.36]
Inventories ·are required to be stated at the lower of cost
and net realisable value (NRV)·. [PAS 2.9]
• ac.c.aun!!.ng (polic ,(or .inveot8Fies
• cillr'{ing ·amoimr,generally classified as merchandise,
~ s, m atenals, work jn progress, and fi p_j shed
Measurement of Inventories
9-0odsr- The classifications depend on ·what is
Cost ~ II : [PAS 2.10] · appropriate for the entity
• costs of p11rcbase (including taxes, t ransport, and • ~c;u:r-y-ing-aiiioijfr_j:) of any inventort!:S carried at J.air.....
handling) ,net of trade discounts rece ived , ~ to sell - ~""' d,1~ Lil>~ · •
• _c.6sts-0f c0Avers1on (including fixed and variable • efo11oqif any write -down of inventories recognised
manufacturing overheads) and DL +0.11 as an expense in the period _
• other costs incurred In bringing the inventories to • -UUA°1:' of any _i:evers~La-wr-iteeleWtHo- NRV and
their present location and cond ition the clrcumstancestliaF led to rs I
• £fil!:Yl!l[__amo t::=of Inventories pledged as securltv
PAS 23 Bbrrowlng Costs · entities some limlted for liabilities
Q.tCJJ.mstances w ere arrowing costs (interest) can be • cost of Inventories recognised as expense *
included in cog___Qfjnventorlei that meet tMe defi nition of * Consistent with PAS 1, which allows presentation of
a qualifyingasset. [PAS 2.17 and PAS 23.4]
expenses by function or nature, as· an alternative to
disclosing cost of goods sold expense, PAS 2 allow;.
Inventory cost fillQlJ.ld~ciuae : [PAS 2.16 a·hd 2.18]
an entity to disdose operating costs recogn ise,:
• abnormal waste ... <,o<>1 /""l--l....__
• storage costs ....,•f, ,,11\1, a o,oas , ,.oi ••i\Jloro during the period by nature of the cost (raw materials
and consumables, labour costs, other operatinu
• adm inistrative overheads unrelated to production - lXf'- 0!{
costs) and the amount of the net change :r,
• sell ing costs --1 '"r•r·, c
in ventories for the period). [PAS 2.39]
@ - end of FAR,2802 - 0

Page 9 of 9 www.ortc.com.ph FAR.2802