Inventories costs As a new graduate you have been assigned to the accounting team led by Andy Steel. Andy wants to determine your expertise in relation to accounting for inventories and has given you the following list of questions.

Required Andy has asked you to provide a detailed response.

1. A company is involved in the wholesaling and retailing of tyres for imported cars. Most of the inventories are imported, and are valued on the company's records at the actual inventories cost plus freight-in. At year end, the warehousing costs are prorated over costs of goods sold and ending inventories. Are warehousing costs a product cost or a period cost?

2. A certain portion of the company's inventories consists of obsolete items. Should obsolete items be classified as part of inventories?

3. A company purchases aeroplanes for sale to other entities. However, until they are sold, the company charters and services the planes. What is the proper way to report these aeroplanes in the company's financial statements?