Brian Ltd starts selling footballs in 20X8. Although each ball looks the same, the unit cost of
Question:
Brian Ltd starts selling footballs in 20X8. Although each ball looks the same, the unit cost of manufacture (which is done in batches) has fluctuated during the period. Details of the costs are as follows:
Details of sales are as follows:
The closing inventory was counted on 30 June and found to be 70 units.
Required
a. Calculate the cost of sales for the year ended 30 June 20X9 and detail the value of the closing inventory using the FIFO, LIFO and weighted average inventory valuation cost flow methods (inventory movement sheets are required).
b. Prepare extracts from the statement of performance for the year ended 30 June 20X9 based on the three valuation methods – explain why a different profit is reported under each method.
c. What inventory valuation method is not permitted under IAS 2?
d. Explain in which circumstances (if any) it would be appropriate to use the following cost flow assumptions:
i. first in first out (FIFO) assumption;
ii. last in, first out (LIFO) assumption;
iii. specific identification assumption;
iv. weighted average cost assumption.
Step by Step Answer:
Introduction To Financial Accounting
ISBN: 9781526803009
9th Edition
Authors: Anne Marie Ward, Andrew Thomas