2 Part 1. Write a short memorandum to the Managing Director of a newly established manufacturing company explaining IAS2 (Accounting for Inventories). Your memorandum should include the following (a) The definition of 'inventories' and how inventories should be measured in the financial statements (b) A discussion of the costs that should be included in inventories in financial statements. (20 marks) (c) A brief discussion of LIFO, FIFO and average cost, stating what they are and which methods are in accordance with IAS2. Part 2. Decor Ltd. (Decor) prepares its financial statements to 31 December each year. The inventory was counted on 31 December 2016 and valued at cost price. The total value of inventory was 126,318. The following information has come to light since the year end. (a) Due to lack of space in the warehouse some inventory was stored in a secure yard. The inventory was valued at a cost of 950. However, due to bad weather before Christmas, the inventory has deteriorated. It could be sold for 1400 if 350 was spent to make it suitable for sale. (b) Inventories costing 2,515 sent to customers on a sale or return basis have been included in Inventory valuation at their selling price of 3,269. (c) A fire broke out in one of the company's warehouses on 2 January 2017 destroying inventory valued at a cost of 10,250. Requirement State the amount that should be included in the financial statements of Decor Ltd for inventories as at 31 December. Give reasons for your answer. Part 3. (6 marks) What are the requirements of IAS20 Accounting for Government Grants and Disclosure of Government Assistance concerning: (a) Grants relating to assets? (b) Grants relating to income? (e) Non-monetary grants? Total Marks for Question 2 (9 marks) (35 marks)