Case 3: As a part of the account's finalization team for XYZ SAOG you been allocated certain transactions which you must deal with. Such items relate to inventory valuation at the end of the year and preparation of cash flow statement. You are required to provide with appropriate treatment with regards to the underlying standards for inventory valuation and cash flow statements: Inventory items. For each of the items mentioned below provide the correct treatment and calculate the amount of each item of inventory. (6 marks) Item 1: Material costing RO 42,000 was purchased in relation to a highly profitable special order made by a customer. Just before the year end such special order got cancelled. This material has no other alternative use. Since buying of this material, the cost price has fallen to RO 39,000 on the valuation date. Item 2: A machine was constructed for a customer for a contract price of RO 72,000. This has recently been completed at a cost of RO 66,000 before the year end. It was now been discovered that, in order to meet certain safety regulations, it needs a modification at an extra cost of RO 10,000. The customer has agreed to meet half of the extra cost. Item 3. The Company has fabricated energy saving equipment during the year as per the design and drawing supplied by the customer for a price of RO 45.000. However due to a liquidity crunch the customer has requested the company for postponement in delivery schedule and requested the company to withhold the delivery of equipment. The company follows cost plus pricing on such tailor-made products and charges 10% profit on the selling price. Due to such delay there was an additional storage cost of RO 1,500 to be incurred The company is also in the process of preparing its cash flow statement: For each of the items mentioned below provide with your necessary comments and treatment. (4 marks) . During the end of the year the company pad its loan installment of RO 150,000. The principal amount in such instalment amounted to RO 125,000. The accountant has recorded this transaction in the cash flow from operating activities. . Also, the company had sold a part of machinery having a carrying amount of RO 35,000 at a profit of RO 5.000. This was shown in cash flow from investing activity at a sum of RO 40,000 and RO 5,000 profit was recorded in the cash flow from operating activities Case 3: As a part of the account's finalization team for XYZ SAOG you been allocated certain transactions which you must deal with. Such items relate to inventory valuation at the end of the year and preparation of cash flow statement. You are required to provide with appropriate treatment with regards to the underlying standards for inventory valuation and cash flow statements: Inventory items. For each of the items mentioned below provide the correct treatment and calculate the amount of each item of inventory. (6 marks) Item 1: Material costing RO 42,000 was purchased in relation to a highly profitable special order made by a customer. Just before the year end such special order got cancelled. This material has no other alternative use. Since buying of this material, the cost price has fallen to RO 39,000 on the valuation date. Item 2: A machine was constructed for a customer for a contract price of RO 72,000. This has recently been completed at a cost of RO 66,000 before the year end. It was now been discovered that, in order to meet certain safety regulations, it needs a modification at an extra cost of RO 10,000. The customer has agreed to meet half of the extra cost. Item 3. The Company has fabricated energy saving equipment during the year as per the design and drawing supplied by the customer for a price of RO 45.000. However due to a liquidity crunch the customer has requested the company for postponement in delivery schedule and requested the company to withhold the delivery of equipment. The company follows cost plus pricing on such tailor-made products and charges 10% profit on the selling price. Due to such delay there was an additional storage cost of RO 1,500 to be incurred The company is also in the process of preparing its cash flow statement: For each of the items mentioned below provide with your necessary comments and treatment. (4 marks) . During the end of the year the company pad its loan installment of RO 150,000. The principal amount in such instalment amounted to RO 125,000. The accountant has recorded this transaction in the cash flow from operating activities. . Also, the company had sold a part of machinery having a carrying amount of RO 35,000 at a profit of RO 5.000. This was shown in cash flow from investing activity at a sum of RO 40,000 and RO 5,000 profit was recorded in the cash flow from operating activities